Under a new HCFA proposal, Medicare would pay less for about 50 drugs it covers beginning Oct. 1 by using more accurate information about wholesale prices.
The plan, outlined in letters from HHS Secretary Donna Shalala to top congressional policymakers, would make new information about wholesale drug prices available to the contractors that process Medicare Part B claims.
HCFA officials said they are not requiring the contractors to use that pricing information, however, because that would force HCFA to undergo a lengthy rulemaking process.
The U.S. Justice Department and state Medicaid fraud control units have collected more accurate pricing data on those 50 drugs, which represent about $1 billion of the $3 billion Medicare pays for drugs each year. They already have provided that information to a data clearinghouse that provides pricing information to state Medicaid programs.
Medicare pays only for outpatient prescription drugs used in conjunction with durable medical equipment, infusion therapy, organ transplantation, dialysis, and chemotherapy and pain management in cancer treatment.
A 1991 regulation allows Medicare to pay for those drugs based on the lower of estimated acquisition costs or "average wholesale prices" as published by a data clearinghouse.
Because HCFA decided it was not feasible to pay the estimated acquisition costs, it has used average wholesale prices. But according to a report from HHS' inspector general's office, the published average wholesale prices for drugs ranged from 11% to 900% higher than the prices actually paid by physicians and other drug administrators.