[Congressional Record (Bound Edition), Volume 146 (2000), Part 13]
[Extensions of Remarks]
[Page 18595]
[From the U.S. Government Publishing Office, www.gpo.gov]



      HOW DRUG PROFITS DRIVE DOCTORS TO INCREASE DRUG UTILIZATION

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                      Tuesday, September 19, 2000

  Mr. STARK. Mr. Speaker, at the Department of Justice's prodding, 
Medicare and Medicaid are finally going to reimburse drugs at a more 
accurate rate. In the past, we have paid for drugs at 95% of the 
Average Wholesale Price (AWP)--a wholly artificial and often grossly 
inflated price.
  The action by HCFA should be welcome by taxpayers. But it should also 
be welcome by patients--and not just because patients will now face 
lower co-payment amounts. The worst aspect of the AWP pricing abuse has 
been that it distorts medical judgment, causing many--not all, but 
many--doctors to increase their utilization of drugs on which the 
doctors can make the most money on the ``spread'' between the listed 
AWP price, and what the actual cost to the provider is.
  The following data shows the phenomenon: there is absolutely no 
reason that the nation's utilization of ipratropium bromide has 
soared--other than doctors can now make over a 100% profit on the 
product. If you need ipratropium bromide, you should get it. You should 
not be getting it because your doctor makes a bigger and bigger profit 
on it.
  I think the evidence will show that there are better cancer drug 
fighting products available to people, which are not being used because 
the doctors make more profit on the poorer quality product.
  Reform of the AWP will not only save dollars--it will stop an 
insidious form of medical malpractice.
  How has Medicare Utilization for the Inhalation Drug Ipratropium 
Bromide (HCPCS codes K0518 and J7645) changed as the ``spread'' or 
profit that doctors can make on the use of the product has increased?
  In 1995, Medicare paid $3.11 for a unit, and that's what it cost the 
provider. There was no spread, and Medicare spent $14,426,108 on the 
product.
  In 1996, Medicare reimbursed $3.75 a unit, but the cost to doctors 
was only $3.26, giving a 49 cent profit or a 15% spread. Interest in 
the product picked up, with Medicare spending $47,388.622.
  In 1997, Medicare's reimbursement was $3.50 a unit, but the 
providers's true cost was only $2.15, giving a profit spread of $1.35 
or 63%. Sales of the product really starting taking off, and Medicare 
spent $96,204,639 on the product.
  In 1998 and 1999, Medicare reimbursed $3.34 for a unit. In 1998, 
doctors could get it for about $1.70, giving them a profit of 96% or 
$1.64 per unit. Sales totaled $176,887,868! In 1999, the drug was 
available for $1.60, giving users a 108% profit. We don't have the data 
on total 1999 Medicare expenditures on this product yet, but I bet, Mr. 
Speaker, that it is higher than ever.
  This example is exhibit #1 why we need AWP reform.

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