MEDICARE: Overpays $1 Billion For Drugs, IG Says

      Medicare is being charged $1 billion more than the Veterans Affairs Department for the same drugs, according to a report conducted by the inspector general of the Department of Health and Human Services. The Los Angeles Times reported that a "study of 34 drugs showed that Medicare pays anywhere from 15% to a whopping 1,600% more than the VA for the identical compounds," spending $2.07 billion, nearly twice as much as the VA's $1.03 billion (Rosenblatt, 11/27). Of the drugs studied, the report found that 14 of them were more than doubly expensive for Medicare than the VA, and that three drugs cost the Medicare system "at least 16 times the amount paid by the VA." The Washington Post reported that the discrepancy is in the way Medicare pays for drugs. Medicare currently "reimburses physicians and suppliers for drugs they administer or provide to the beneficiaries," while the VA takes advantage of volume discounts by buying "drugs for its health care system directly from manufacturers or wholesalers." And at a further disadvantage to the Medicare coffers, the IG report found that many doctors and suppliers often receive discounts on the drugs but don't pass them on to Medicare.

Time For Change
      "Drug industry charges to Medicare are a scandal," said Rep. Pete Stark (D-CA), who requested the investigation. The Post reported that the IG urged "comprehensive statutory reform of Medicare's prescription drug reimbursement methodology." Nancy-Ann Min DeParle, head of the Health Care Financing Administration, which oversees Medicare, called the report "extremely disturbing" and said her agency agrees with the report's recommendation that "until Congress reforms the system, it should use new authority in the Balanced Budget Act to 'reduce Medicare's unreasonably high payments for certain drugs' through such means as competitive bidding" (Branigan, 11/28). In response to the report, "the drug industry said patients could be hurt if Medicare adopts a more stringent price schedule." Alixe Glen, vice president of public affairs for the Pharmaceutical Research and Manufacturers of America, explained that lower drugs prices "could lead to limited lists of drugs for doctors to choose from," warning "There could be very restricted access to medicine. ... When you restrict a physician's ability to prescribe what a patient needs, you inevitably drive up other costs" (Times, 11/26). The Post reports that the IG's findings "are expected to come up for discussion" this week when the Medicare Payment Advisory Commission meets (11/28).