[MOL] Drug Price Fixing War..... [00461] Medicine On Line

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[MOL] Drug Price Fixing War.....

By Joel B. Finkelstein

Investigations by several federal agencies have documented that drug companies have engaged in rampant price manipulation in order to sell their products, sometimes to the detriment of patients.

Documents released last week by Representative Tom Bliley (R-Va.), chairman of the House Commerce Committee, show that several drug companies have been selling their products to doctors’ offices at well below the average wholesale price (AWP). Drug companies have also used rebates, cash-back offers and other discounts to increase the profit to these buyers.

Companies then used the difference between the AWP and the doctors’ actual cost as a selling point for their products. Marketing material uncovered by the investigation revealed that companies would often provide side-by-side comparisons of the “spread” between their drug and a competitor’s.

In a letter to the Health Care Financing Administration (HCFA), the agency that oversees Medicare programs, Bliley cited several examples of the practice of price manipulation. In 1998, the chemotherapy drug etoposide cost a doctor’s office $14 a dose, while the AWP was $141.97. Another common chemotherapy drug, leucovorin, cost the doctor’s office $1.89, less than half the 20 percent co-payment of $4.36 paid by the Medicare beneficiary and far below the $21.53 total payment made to the doctor’s office.

“We have worked consistently to reduce the excessive prices that the law requires Medicare to pay,” Robert A. Berenson, M.D., director of HCFA’s center for health plans and providers, said in a statement last week.

Medicare covers a select few drugs, such as chemotherapy drugs. By law, Medicare reimbursement for drugs administered in a doctor’s office is 95 percent of the AWP. Working with the Clinton administration, HCFA has tried to change this policy to more accurately reflect true market costs. Proposals such as cutting reimbursement to 83 percent of the AWP or paying only the actual doctor’s cost, have failed to gain a support in Congress.

Previous investigations by both the Department of Health and Human Services’ Inspector General’s Office and the Department of Justice have turned up similar evidence of price manipulation. In fact, those investigations led to the Justice Department publishing its own drug catalogue with “more accurate” average wholesale prices.

Other sources of AWP--the most commonly used one is known as the “Red Book”--are published independently from the drug industry. However, the committee investigation revealed that those prices are still based on numbers reported by the industry, numbers that are often artificially inflated.

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