Pharmacists inflating charges for Medicaid drugs

Wednesday, December 8, 2004

WASHINGTON -- Taxpayers could save hundreds of millions of dollars a year if soaring Medicaid reimbursements for prescription medicines more closely matched pharmacists' costs, according to a congressional investigation made public Tuesday.

The government health care program for the poor spent more than $31 billion on prescription drugs in 2003, triple the amount spent 10 years earlier. The program's costs are shared by the federal and state governments.

"The government pays far too much for many prescription drugs under Medicaid," said Rep. Joe Barton, R-Texas, chairman of the House Energy and Commerce Committee. The panel's investigation into Medicaid drug prices was the subject of a hearing Tuesday.

Medicaid rates often are more generous than those negotiated by private insurers, Barton said.

The problem is especially acute with generic medicines, on which pharmacists are reaping two or three times their cost, the investigation found.

Information supplied by five large retail pharmacy chains showed that drug stores paid an average of 22 cents for seven widely prescribed generic medicines, but received 56 cents in reimbursements from Medicaid, the investigation found.

Barton said pharmacists generally acknowledge that they are paid too much for some drugs. But they argue that the inflated prices are necessary to offset inadequate fees for other services they provide to Medicaid recipients, Barton said.

Another lawmaker, Rep. Ed Markey, D-Mass., said, "We have to address the fact that the current reimbursement system almost begs to be exploited."

The situation is similar to Medicare's reimbursement for cancer drugs administered to patients in doctors offices. For years, the physicians received inflated reimbursements from Medicare to make up for paltry payments for counseling, office expenses and other services given to patients.

Medicare, the health program for older and disabled Americans, is in the process of overhauling that system, although it is facing complaints from doctors and patient advocates that the new payments could limit access to the drugs for some patients.

Other problems contribute to unnecessary costs, said George Reeb, an assistant inspector general in the Health and Human Services Department.

In one example, Medicaid could have saved more than $85 million in 2001 if drug payments were uniform across all states, Reeb said.

States also do a poor job managing the rebate payments they receive from drug manufacturers that take part in the Medicaid program, he said.

Medicaid fraud also is costing the program hundreds of millions of dollars, said Taxpayers Against Fraud Education Fund, a whistle-blowers' group.

Three whistle-blower cases against drug makers that were settled between October 2003 and September 2004 netted $800 million, the group said. Two cases involved fraud allegations against Schering-Plough and the other involved Pfizer.


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House Energy and Commerce Committee: http://energycommerce.house.gov

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