[Congressional Record Volume 146, Number 127 (Thursday, October 12, 2000)]
[Extensions of Remarks]
[Pages E1764-E1765]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


    STARK CALLS FOR FURTHER FDA INVESTIGATION INTO ABUSE OF AVERAGE 
                         WHOLESALE PRICE SYSTEM

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                      Wednesday, October 11, 2000

  Mr. STARK. Mr. Speaker, I today sent the following letter to the FDA, 
in support of an investigation of how some of the nation's leading drug 
manufacturers are using false pricing data to distort the practice of 
medicine in America. The data in the letter is an indictment of the 
companies' abuse of the taxpayer and of the patient.
  I submit the following letter into the Record:

                                     House of Representatives,

                                 Washington, DC, October 10, 2000.
     Dr. Jane E. Henney,
     Commissioner, Food and Drug Administration, Rockville, MD.
       Dear Dr. Henney: I am writing you to supplement my recent 
     letter of October 3, 2000. I would request that any FDA 
     investigation into whether certain drug companies have 
     engaged in conduct that violates FDA rules or regulations 
     take into account the following:
       1. The findings contained in the HHS-OIG report entitled 
     Infusion Therapy Services Provided in Skilled Nursing 
     Facilities (December 1999 A-06-99-00058) Exhibit #1. The 
     OIG's independent findings provide compelling evidence of the 
     magnitude, cost and public health issues resulting from drug 
     price manipulation of the Medicare program.
       The following excerpts from the above referenced OIG report 
     are particularly noteworthy:
       ``Our review of three infusion suppliers, for the period 
     1995 through 1998, showed they provided infusion therapy 
     services to Medicare-reimbursed SNFs that were excessively 
     priced and unnecessary.'' (Page #1)
       ``At the 22 SNFs, $4.8 million out of $9 million in claims 
     reviewed (53 percent) were not medically necessary.'' (Page 
     #1)
       ``In addition to the financial effects we noted above, 
     overutilization and overpricing were potentially harmful to 
     the patients. Medical reviewers who were part of our audit 
     concluded that patients receiving unnecessary infusion 
     therapy services were placed at undue risk for complications, 
     including increased risk of infection, fluid and electrolyte 
     imbalance, and medical reactions. Furthermore, in addition, 
     infusion services are invasive procedures that are painful 
     and, when unnecessary, reduce the quality of life.''
       ``Based on a survey of infusion suppliers in Texas, we 
     found that charges for infusion drugs varied widely, from as 
     little as Average Wholesale Price (AWP), which is generally 
     considered a reference price for drugs by the pharmaceutical 
     industry, to more than 20 times AWP.'' (Page #6)
       2. The public health consequences of the drug pricing 
     manipulation by certain companies for the IV antibiotic 
     Vancomycin, the drug of last resort for many life theratening 
     infections. Exhibit #2 features an article from Hospital 
     Pharmacist Report entitled Under Attack Vancomycin-resistant 
     S. Aureus Hits U.S. Shores. ``The widespread, and often 
     unwarranted, use of antimicrobial agents, particularly 
     vancomycin is a major contributing factor in the emergence of 
     S. aureau with diminished susceptibility to vancomycin.'' 
     Indeed, as stated in the article, the problem has reached the 
     level where the CDC has called for strict limits on the use 
     of this vital drug. ``Published in the MMWR, detailed 
     recommendations for preventing and controlling S. aureus with 
     diminished susceptibility to vancomycin emphasize strict 
     adherence to contact isolation precautions and their 
     recommended infection control practices, judicious use of 
     vancomycin . . .'' (emphasis added).
       Enclosed as composite Exhibit #3 (provided by the industry 
     insider pursuant to a congressional subpoena) is:
       1. Listings from the 1995, 1996 & 1999 Red Book for 
     Abbott's generic Vancomycin.
       2. Copies of advertisements from Florida Infusion for the 
     years '95, '96 and '99 for Abbott's genreic Vancomycin.
       The following chart summarizes Exhibit 3:

                           ABBOTT'S VANCOMYCIN
                      [1 gm. 10s NDC#00074-6533-01]
------------------------------------------------------------------------
                                                   Florida    Difference
                                                   infusion  between AWP
            Year               Red Book    Red       true       & true
                                 AWP     Book DP  wholesale  price ``The
                                                    price      Spread''
------------------------------------------------------------------------
1995........................     604.44             $8.40/1       $52.04
                               (60.44/1                  gm
                                   gm.)
1996........................     628.66             $7.95/1       $54.91
                               (62.86/1                  gm
                                   gm.)
1999........................     727.82   612.90      74.00       $65.38
                               (72.78/1            ($7.40/1
                                   gm.)                gm.)
------------------------------------------------------------------------

       As the above chart also demonstrates, Abbott actually 
     raised its representations of AWP from 1996 to 1999 while the 
     true wholesale price to providers fell from $7.95 to $7.40. 
     Abbott's price manipulation, creating a financial incentive 
     for doctors to increase their usage of Vancomycin at a time 
     when America is experiencing a health crisis, is 
     reprehensible conduct and clearly warrants an FDA 
     investigation.
       You may question why a major drug company would engage in 
     this deplorable conduct? Abbott's direct benefit from its 
     false price manipulation is demonstrated by data (enclosed as 
     Exhibit #4 provided by the industry insider pursuant to a 
     congressional subpoena) for calendar year 1996 from the State 
     of Florida's Medicaid Pharmacy Program. The data outline 
     Florida Medicaid's reimbursements paid to the customers of 
     Abbott and utilization of Abbott's generic Vancomycin. Abbott 
     maximized sales volume and captured the Florida medicaid 
     pharmacy market for Vancomycin by causing the Florida 
     Medicaid program to substantially inflate reimbursement to 
     the detriment of Florida's Medicaid Program. As you know, 
     drug companies capture market share and maximize sales volume 
     by concealing true drug prices while falsely representing 
     grossly inflated prices which in turn creates a spread 
     between the providers' costs and the amount of reimbursement 
     paid by Medicaid or Medicare. As a result, Abbott has 
     captured the majority of the market (at least for Medicaid) 
     by creating a financial incentive for doctors to increase 
     their usage of the over-prescribed drug (Exhibit #5--prepared 
     by the National Association of Medicaid Fraud Control Units 
     in conjunction with their ongoing investigation).
       The insider's evidence demonstrates that providers will 
     purchase and utilize the pharmaceutical manufacturer's 
     product that has the widest spread between the provider's 
     true cost and the reimbursement paid by third parties 
     (including the States' Medicaid Programs and Medicare). For 
     example, 1996 reimbursement demonstrates that the 
     manufacturer which causes the widest spread, benefits from 
     the highest utilization. The pharmaceutical manufacturers 
     Abbott, Fujisawa, Lederle Lilly and Schein all made 
     representations of Wholesaler Acquisiton Cost (``WAC'') to 
     the State of Florida as illustrated in the chart below. The 
     chart further sets out the number of reimbursed claims, the 
     insider's cost and ``the spread'' between Medicaid 
     reimbursement and true cost. A review of the chart clearly 
     demonstrates that the vast majority of providers utilize the 
     manufacturer's pharmaceutical with the greatest spread 
     between the true Wholesale Acquisition Cost and the inflated 
     false WAC reported by Abbott.

                            1996 FLORIDA MEDICAID UTILIZATION FOR VANCOMYCIN HCL 1 GRAM
----------------------------------------------------------------------------------------------------------------
                                                                                          Reimbursement
                                                          True      Florida        The       paid by       % of
                      Company/NDC                        cost $     Medicaid     spread      Florida      market
                                                                 Reimbursement               Medicaid     share
----------------------------------------------------------------------------------------------------------------
Abbott/00074-6533-01...................................   $7.95       $58.75      $50.80    $381,480.78    83.37
Fujisawa/00469-2840-40.................................    6.42        13.91        7.49      19,023.54     4.16
Lederle/00205-3154-15..................................    3.98         9.36        5.38      21,297.64     4.65
Lilly/00002-7321-10....................................   14.30        13.35      (0.95)      19,096.96     4.17
Schein/00364-2473-91...................................    6.05        12.52        6.47      16,672.18     3.64
----------------------------------------------------------------------------------------------------------------

       It is important to note that Abbott publishes and reports 
     truthful prices for many of its drugs when it does not seek 
     to create a financial incentive to the provider. The 
     following attached as composite Exhibit #6 is a chart 
     specifying numerous drugs for which Abbott reports truthful 
     prices:

             ABBOTT LABS 1999 REPRESENTATIONS OF PRICES AND COST AND STATES' MEDICAID REIMBURSEMENT
----------------------------------------------------------------------------------------------------------------
                                                 Bergen     Provider
                                    Red Book    Brunswig    cost with  Florida Medicaid WAC   New York Medicaid
Drug Strength & Size, NDC# 00074-      AWP        cost       7% up-            + 7%                AWP-10%
                                                 (WAC*)      charge
----------------------------------------------------------------------------------------------------------------
Biaxin 500 MG, 60S NDC#2586-60...     $195.59     $164.13     $175.62  175.62 Spread $0.00.  $176.04 Spread
                                                                                              $0.42 (0.2%).
Cartol 5mg, 100s NDC#166-13......      106.18       88.76       94.97  94.97 Spread $0.00..  $95.57 Spread $0.60
                                                                                              (0.6%).
Cylert Tablets 37.5mg, 100s NDC#       144.84      121.67      130.18  130.18 Spread $0.00.  $130.36 Spread
 6057-13.                                                                                     $0.18 (0.1%).

[[Page E1765]]

 
Depakote 250mg, 100s NDC# 6214-11       82.66       69.30       74.15  $74.15 Spread $0.00.  $74.40 Spread $0.25
                                                                                              (0.3%).
----------------------------------------------------------------------------------------------------------------
\*\ WAC--Wholesaler Acquisition Cost (7 states use WAC for reimbursement).

       3. Examination of another Medicare reimbursed drug further 
     confirms that the drug manufacturers engaging in the price 
     manipulation are correct when they assume that the financial 
     incentives they arrange will increase the usage of their 
     drugs. Atrovent (Ipratropium Bromide) is an inhalant 
     medication that had almost no Medicare utilization while it 
     was under patent and not subject to any generic competition. 
     Sometime in 1997, Atrovent came off patent and became subject 
     to generic competition. Certain manufacturers of the generic 
     form of the drug began to make false price representations to 
     create a financial inducement. As the chart below indicates, 
     Medicare utilization has gone from $14,426,108.00 in 1995 to 
     $253,400,414.00 in 1998. The spread has gone from virtually 
     zero to over 100%!

----------------------------------------------------------------------------------------------------------------
                                                                       True
                                                       Medicare      cost per   Spread   Spread      Medicare
                      Year                          Reimbursement    Medicare     $        %       expenditures
                                                   amount per unit*   unit**
----------------------------------------------------------------------------------------------------------------
1995............................................   $3.11 ($0.62/ml)     $3.11     0.00        0      $14,416,108
1996............................................     3.75 (0.75/ml)      3.26     0.49       15       47,388,622
1997............................................    3.50 ($0.70/ml)      2.15     1.35       63       96,204,639
1998............................................               3.34      1.70     1.64       96      176,887,868
1999............................................               3.34      1.60     1.74      108     253,400,424
----------------------------------------------------------------------------------------------------------------
\*\ Medicare Units were converted from ml's to mg's for the years 1995, 1996 & 1997 (5 ml=1 milligram).

       Would you please advise me if the FDA since 1995 has 
     approved any other additional indications that might explain 
     the dramatic increase in the utilization of Ipratropium 
     Bromide. Is there any medical reason for these noted 
     utilization increases?
       It is essential that the Health Care Financing 
     Administration and other government reimbursement authorities 
     receive truthful and accurate information from drug 
     manufacturers regarding drugs for which the government 
     reimburses. The evidence uncovered by the Congressional 
     investigation to date reveals a conscious, concerted and 
     successful effort by some drug makers to actively mislead the 
     Health Care Financing Administration and others about the 
     price of their drugs. As the federal agency possessing 
     primary regulatory responsibility with respect to drug 
     makers' representations about their products, I urge the Food 
     and Drug Administration to take immediate action before the 
     present fiscal and public health consequences reach a 
     catastrophic level.
           Sincerely,
                                                       Pete Stark,
                                             Member of Congress.  

     

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