Drug Makers Accused of Ignoring Price Law

WASHINGTON — Drug manufacturers often flout a federal law that requires them to provide the government with pricing data needed to calculate discounts on medications prescribed for poor people under Medicaid, federal investigators say in a new report.

The information is not submitted at all, is filed late or is incomplete, the investigators said, and as a result Medicaid overpays for prescription drugs.

The problem, they said, could become more significant under President Obama’s new health care law, which increases the amount of the discounts and promises to add millions of people to the Medicaid rolls.

In a new initiative intended to force compliance, Daniel R. Levinson, the inspector general at the Department of Health and Human Services, who led the investigation, said he would impose civil fines on drug manufacturers that fail to meet their price-reporting obligations.

Under federal law, the government can impose penalties of $10,000 a day on a drug manufacturer that fails to provide the information “on a timely basis.”

The government has had this authority since 1990 but has not used it, the inspector general said.

Mr. Levinson said he found that more than three-fourths of drug manufacturers did not fully comply with the law requiring them to provide price data. They are supposed to file monthly and quarterly reports on what wholesalers paid them for drugs eventually sold to retail pharmacies.

Medicaid spends tens of millions of dollars a year on drugs made by companies that did not submit the required price data to the government, Mr. Levinson said. Without price data, the federal government cannot compute rebates, and states may be unable to collect them.

As a condition of having their drugs covered by Medicaid, pharmaceutical companies must agree to provide discounts in the form of rebates. Drug companies pay the rebates to state Medicaid programs. The federal government and the states share the cost of Medicaid — roughly $400 billion in the last year — and share the savings that result from the rebates.

Ann Leopold Kaplan, deputy general counsel of the Pharmaceutical Research and Manufacturers of America, a trade group, said drug companies “take compliance issues very seriously.” But, she added, “reporting of the average manufacturer price is very complex,” and the task has been made more difficult by many recent changes in laws.

Under the health care law, the minimum rebate on brand-name drugs dispensed to Medicaid recipients was increased to 23.1 percent of the average manufacturer price, from 15.1 percent. The minimum rebate on generic drugs was increased to 13 percent, from 11 percent.

The Congressional Budget Office estimates that the changes could save the federal government more than $35 billion over 10 years. Major drug companies are already reporting adverse effects on their revenues. However, drug companies stand to gain many customers with the scheduled Medicaid expansion in 2014.

Medicaid officials contend that “they do not currently have the resources” to identify all the manufacturers that fail to submit the data, Mr. Levinson said. He recommended that Medicaid officials aggressively pursue such manufacturers. Medicaid officials agreed to do so, but would not discuss enforcement plans.

The prices reported by drug manufacturers “play a critical role” in determining what the government pays for prescription drugs, Mr. Levinson said. They are used to calculate the rebates owed to states under Medicaid and to establish discounts on drugs bought by community health centers and hospitals serving large numbers of poor people. In addition, federal officials can use the data to set limits on what Medicaid will pay pharmacies for the generic versions of certain brand-name drugs.

In another report, the Congressional Budget Office said that Medicare could save substantial amounts of money through greater use of generic drugs.

About 65 percent of prescriptions in Medicare’s outpatient drug program are already filled with generic drugs, the budget office said. Medicare could achieve additional savings by encouraging people to “switch to the generic form of a different drug in the same therapeutic class,” the report said.

A pharmacist must ordinarily obtain the consent of the prescribing physician before substituting a generic drug for a brand-name product that is not chemically equivalent, the report said.

via nytimes.com

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