Congress probes high Medicaid drug costs

WASHINGTON -- Taxpayers could save hundreds of millions of dollars a year if soaring Medicaid reimbursements for prescription medicines more closely matched pharmacists' costs, according to a congressional investigation made public yesterday.

The government health care program for the poor spent more than $31 billion on prescription drugs in 2003, triple the amount spent 10 years earlier. The program's costs are shared by the federal and state governments.

"The government pays far too much for many prescription drugs under Medicaid," said Representative Joe Barton, a Texas Republican who is chairman of the House Energy and Commerce Committee. The panel's investigation into Medicaid drug prices was the subject of a hearing yesterday.

The problem is especially acute with generic medicines, on which pharmacists are reaping two or three times their cost.

Information supplied by five large retail pharmacy chains showed that drug stores paid an average of 22 cents for seven widely prescribed generic medicines, but received 56 cents in reimbursements from Medicaid, the investigation found.

Barton said pharmacists generally acknowledge that they are paid too much for some drugs. But they argue that the inflated prices are necessary to offset inadequate fees for other services they provide to Medicaid recipients.

Another lawmaker, Representative Edward J. Markey, Democrat of Malden, said, "We have to address the fact that the current reimbursement system almost begs to be exploited."

The situation is similar to Medicare's reimbursement for cancer drugs administered to patients in doctors offices. For years, the physicians received inflated reimbursements from Medicare to make up for paltry payments for counseling, office expenses, and other services given to patients.