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.
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.
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
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
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.