GAO warns of Medicare drug overcharging

WASHINGTON --Federal law makers should consider doing more to ensure the government is not overcharged for prescription drugs, according to a government watch dog.

A director for the Government Accountability Office told members of Congress Friday that the Medicare drug benefit program is vulnerable to false billing schemes because it relies on private companies to report drug prices. Under the program, about 42 million eligible senior citizens can choose between thousands of prescription drug plans offered by health insurers that individually negotiate drug prices with manufacturers.

GAO's health care director John Dicken said the Medicare drug program's "complex set of relationships and transactions with private entities" makes it difficult to verify the accuracy of drug prices charged to the government. Dicken told members of the House Committee on Oversight and Government Reform that Medicare needs to have systems in place to spot inflated price reporting.

In 2006, plans offered by UnitedHealth Group and Humana had the highest enrollment numbers although the GAO report did not single out any companies or providers by names. Representatives from Humana and UnitedHealth were not able to provide immediate comment for this story.

The hearing comes nearly one month after Democrats in the House pushed through legislation that would require the government to negotiate Medicare drug prices directly with drug manufacturers. The bill is pending in the Senate but President Bush has promised to veto it, saying the current system is already reducing prices for seniors.

Last year one drug maker agreed to settle charges brought by state and federal prosecutors that it allegedly inflated prices of its products.

Last August, GlaxoSmithKline paid $41 million to settle claims by more than 40 state Medicaid programs. Several months earlier, the Justice Department opened a suit against Abbott Laboratories, alleging the company's billing schemes cost government health programs more than $175 million over 10 years. The case is currently pending in U.S. District Court of Massachusetts.