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Medicare Overcharged For Drugs But House GOP Moves to Protect Drug Manufacturers Federal audits have found that Medicare and Medicaid programs paid billions of dollars too much for drugs because manufacturers set inflated prices for the government programs. Although Medicare doesn't cover most prescription drugs, it does pay for drugs when patients are hospitalized or for those administered by a doctor. The government doesn't pay drug manufacturers directly for the cost of medicines administered by health care professionals. The health care providers buy the drugs at a discount and then get reimbursed by Medicare or Medicaid based on average wholesale prices, prices that are supplied by the drug makers. For example, in 1996, Medicare reimbursed $42.21 for the Baxter leukemia drug, Gammagard, but the actual wholesale price was $16.12. Clinics, some physicians, and other providers have made extra profits giving them an incentive to choose products from the drug companies that can guarantee the highest reimbursements. The Health Care Financing Administration (HCFA) recently announced that it would cut the price Medicare pays doctors and home health agencies for 50 prescription drugs on October 1 of this year, but House GOP immediately moved to block the plan. House Commerce Committee Chairman Thomas Bliley (R-VA) said the HCFA couldn't cut drug prices without issuing proposed regulations to do so. That process can take months, even years to complete. Among the drugs slated for price cuts is the cancer drug, Lupron, which is made by TAP Holdings Inc., a joint venture of Takeda Chemical Industries and Abbot Laboratories. Abbot is located in Richmond, Virginia, part of Bliley's home district. House Republicans included legislation that would scale back the Clinton Administration's plan to slash reimbursements, as part of their prescription drug plan. The GOP prescription drug legislation already contains a $200 million provision that would potentially increase Medicare reimbursements for cancer, heart and multiple sclerosis drugs. Sources: "Bayer In Talks With U.S. To Settle Drug Pricing Probe," Bloomberg News, May 10, 2000. "U.S. Medicare Drug Prices May Fall 17% Or More", Bloomberg News, May 30, 2000. "U.S. Medicare To Cut Reimbursement For 50 Drugs," Bloomberg News, June 1, 2000. "House Republicans May Scale Back Medicare Drug Cuts," Bloomberg News, June 8, 2000. This article first appeared in Volume 5, Issue 9 of "The Social Security and Medicare Advisor" newsletter (September/2000). To receive future editions of "The Advisor" in its special, free e-mail version, please click here. | ||||||||
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