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House
Committee Report finds Medicare Pays Up to
30% More for Medications Under Part D Plans
[Jul
25, 2008] The
House
Committee on Oversight and Government Reform
during a hearing on Thursday released a
report that found the Medicare drug benefit
in its first two years has paid about 30%
more for prescription drugs than Medicaid
would have paid for the same medications,
costing the program about $3.7 billion, the
Los
Angeles Times reports (Gaouette,
Los
Angeles Times, 7/25).
The report examined drug benefit spending
for about six million so-called "dual
eligibles," beneficiaries who qualify for
both Medicare and Medicaid.
In 2006, the first year of the drug benefit,
Medicare paid $1.7 billion more for the 100
most commonly used drugs by dual eligibles
than Medicaid would have paid.
In 2007, Medicare paid about $2 billion more
than Medicaid would have paid. Medicaid, on
average, gets discounts of about 30% on
drugs for beneficiaries.
Medicare receives a discount of about 8% on
average through its drug benefit.
The report stated that
Johnson &
Johnson received $615 million
more from Medicare part D than it would have
from Medicaid, the largest portion of the
$3.7 billion.
Of that money, $500 million came from sales
of Risperidal, an anti-psychotic.
Bristol-Myers Squibb received an
additional $400 million, including $200
million from sales of Plavix, a heart attack
and stroke medication.
Committee Chair Henry Waxman (D-Calif.) said
he would soon introduce legislation that
will require the drug benefit not pay more
than Medicaid would for dual eligible drug
coverage, which he said would reduce drug
spending by as much as $86 billion over 10
years (Reichard,
CQ
HealthBeat, 7/24).
"This is an enormous giveaway and it has
absolutely no justification," Waxman said (Edney,
CongressDaily, 7/24).
Acting
CMS
Administrator Kerry Weems said that the drug
benefit has reduced spending by about 40%
from original projections when Congress was
creating the program. Republicans on the
committee also said that the drug benefit
gives beneficiaries more choices than
Medicaid coverage.
They also warned that cutting drug costs
could hinder innovation in the
pharmaceutical industry.
Waxman responded that spending for the drug
benefit is not as high as projections
because enrollment has not reached projected
levels.
He also said that innovation in the drug
industry was not hampered when the dual
eligibles were receiving drug benefits
through Medicaid, so it would not change if
the drug benefit paid the same rates (CQ
HealthBeat, 7/24).
Richard Smith, vice president of the
Pharmaceutical Research and Manufacturers of
America, said that private market
competition has brought down costs of the
drug benefit for beneficiaries and
taxpayers. He added that the government
should not interfere by setting price
controls (Los
Angeles Times, 7/25).
The report is available
online
(.pdf).
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