Medicaid programs overpaid for brand-name prescription drugs by $1 billion in 1999 because states failed to accurately assess pharmacies' actual costs and demand sufficient discounts to ensure "reasonable" drug prices, according to a new audit report released last week by HHS' inspector general's office.
Medicaid programs typically pay pharmacists a percentage of the average wholesale price (AWP) for brand-name drugs. In 1999, Medicaid programs claimed an average 10.3% discount off the AWP, the audit said. The practice of demanding discounts arose because an audit by the inspector general in 1989 found that the AWP overstated what pharmacies actually paid for drugs by 10% to 20%.
For the latest report, HHS auditors reviewed 16,204 invoice prices for brand-name prescription drugs at 216 pharmacies in eight states. The actual acquisition cost for the 200 most often prescribed brand-name drugs was 21.8% below the AWP, according to the report.
Medicaid programs' drug expenditures were $17.9 billion in 1999, compared with $9.4 billion in 1994.
The inspector general urged the Centers for Medicare and Medicaid Services to bring brand-name drug reimbursement more in line with purchase costs.