[Congressional Record Volume 146, Number 94 (Wednesday, July 19, 2000)]
[Extensions of Remarks]
[Page E1276]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               MORE DOCUMENTATION OF EXCESSIVE RX PRICES

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                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                         Tuesday, July 18, 2000

  Mr. STARK. Mr. Speaker, prescription drug prices are too high for the 
uninsured and the average retail customer who has to buy prescriptions 
on their own.
  How much too high?
  For generics at least 57 percent too high. For single source brand 
name drugs, about 32 percent too high, and for multi-source drugs, 
about 39 percent too high.
  Says who?
  A new Medicare survey of what hospitals actually pay for drugs 
compared to what the so-called Average Wholesale Price is. HCFA is 
issuing a new regulation on how to pay hospitals under the Hospital 
Outpatient Department (HOPD) prospective payment system. As part of 
that new regulation, they had to figure out what the beneficiaries' 20 
percent co-payment should be. Instead of foolishly taking the Average 
Wholesale Price as a gauge of what to apply the 20 percent co-pay 
against, HCFA wisely sampled what the actual acquisition cost of drugs 
are, then developed an average formula to calculate the 20 percent the 
seniors and disabled would owe. Following is the discussion from the 
Federal Register of April 7th.
  This is all more proof that the uninsured and those who are buying 
drugs at retail need help getting the purchasing power of large groups. 
The Democratic Prescription drug bill, H.R. 4770, would help seniors 
get the kind of discounts we know that hospitals are getting. The 
savings to seniors will be phenomenal!

       A one-time exception to the general methodology described 
     above pertains to current drugs and biologicals that will be 
     eligible for transitional pass-throughs when the PPS is 
     implemented. For this final rule, we revised many APC groups 
     by removing, to the extent possible, many of these drugs and 
     radiopharmaceuticals. Therefore, the payment rates for the 
     APC groups with which these drugs are associated exclude the 
     costs of these drugs and the total amount paid to hospitals 
     for the drugs will be 95 percent of the applicable AWP. In 
     order to be able to determine a coinsurance amount for these 
     drugs, we needed to estimate what portion of this payment 
     would have been included as part of the APC payment amount 
     associated with these drugs and what portion would be the 
     pass-through amount. Using an external survey of hospitals' 
     drug acquisition costs, we determined the APC payment amount 
     for many of these drugs as their average acquisition cost 
     adjusted to year 2000 dollars. Where valid cost data were not 
     available for individual drugs, we applied the following 
     average ratios of acquisition cost to AWP calculated from the 
     survey to determine the fee schedule amount: .68 for drugs 
     with one manufacturer, .61 for multi-source drugs, and .43 
     multi-source drugs with generic competitors. In either case, 
     the coinsurance amounts were determined as 20 percent of 
     these fee schedule amounts. It is important to note that 
     these estimates do not affect the total payment to hospitals 
     for these drugs (95 percent of AWP).





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