[Congressional Record (Bound Edition), Volume 146 (2000), Part 16]
[Extensions of Remarks]
[Pages 23866-23867]
[From the U.S. Government Publishing Office, www.gpo.gov]



                      COMMUNICATION FROM PHARMACIA

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                        Monday, October 23, 2000

  Mr. STARK. Mr. Speaker, I am today submitting for the Record a letter 
from the pharmaceutical manufacturer, Pharmacia. This letter was 
written in response to my October 3rd letter to the company's President 
& Chief Executive Officer, Fred Hassan.
  My recent letter, submitted to the Congressional Record on October 
3rd, provided evidence that Pharmacia for many years has

[[Page 23867]]

been reporting and publishing inflated and misleading price data and 
has engaged in other improper, deceptive business practices in order to 
manipulate and inflate the prices of certain drugs. The price 
manipulation scheme has been executed through Parmacia's inflated 
representations of average wholesale price (``AWP'') and direct price 
(``DP''), which are utilized by the Medicare and Medicaid programs in 
establishing drug reimbursements to providers. This pricing scheme by 
Pharmacia and other drug companies is estimated to have cost taxpayers 
over a billion dollars.
  Unfortunately, Pharmacia's recent letter provides no meaningful 
explanation for the company's actions which have overcharged Americans 
and put patient safety at grave risk. Instead, President Hassan places 
the blame on the Department of Health and Human Services' difficult 
reimbursement policies. In this letter he states: ``As you know, 
Medicare and Medicaid reimbursement policies are considerably complex'' 
and ``From my perspective, it is the designing of a system to replace 
the current system that to date has proven to be difficult.'' The 
alleged complexity of Medicare's reimbursement system is no excuse for 
Pharmacia deliberately publishing inflated and misleading price data 
and engaging in other deceptive business practices--business practices 
which the letter fails to mention.
  Contrary to Mr. Hassan's accusation, Medicare's current reimbursement 
method is simple. Medicare pays 95% of a covered drug's average 
wholesale price (AWP). Regardless of the merits of the system, 
Pharmacia, and other drug companies, have abused this system by 
reporting inflated drug prices--plain and simple.
  I appreciate the fact that Mr. Hassan is taking the issues I raised 
in my letter ``very seriously'' and is ``continuing to investigate'' 
the allegations made in my letter. But I firmly believe that the blame 
for reporting misleading--and possibly fraudulent--price data as well 
as engaging in other deceptive company practices must not and cannot be 
placed on HHS' reimbursement policies. Mr. Hassan writes that the 
``current system has proven to be untenable. . . .'' It is the pricing 
practices of companies like his that have made it untenable.
  Pharmacia's behavior overcharges taxpayers--particularly patients--
and endangers the public health by influencing the practice of 
medicine. It is for all of these reasons that I have called on the FDA 
to conduct a full investigation into such drug company behavior.
  The letter from Pharmacia follows:

                                        Pharmacia Corporation,

                                    Peapack, NJ, October 16, 2000.

     Re: Your Letter of October 3, 2000
     Hon. Fortney Pete Stark,
     Cannon House Office Building, House of Representatives, 
         Washington, DC.
       Dear Representative Stark: I am the President, Chief 
     Executive Officer, and a member of the Board of Directors of 
     Pharmacia Corporation (``Pharmacia''). For your information, 
     Pharmacia was created earlier this year upon the merger of 
     Pharmacia & Upjohn, Inc., and Monsanto Company.
       In my capacity as Chief Executive Officer of Pharmacia, I 
     write to acknowledge receipt of your letter of October 3, 
     2000, addressed to Pharmacia & Upjohn, Inc., and to address 
     preliminarily the issues that you raise regarding the 
     reporting and publishing of certain price data for several 
     prescription medications sold by Pharmacia.
       Initially, I want to provide you with my personal assurance 
     that Pharmacia takes the issues raised in your letter very 
     seriously. For your information, Pharmacia has actively 
     provided information regarding our pricing practices to a 
     number of investigative bodies. Also, the Company is 
     committed to continuing to work with the appropriate 
     authorities until any differences that may exist in the 
     understanding of this matter are resolved.
       As to the particulars of your letter, you should know that 
     Pharmacia is continuing to investigate the allegations made 
     in your letter, as well as those that have been reported 
     recently in various news media regarding the pharmaceutical 
     industry's practices in the area of reimbursement.
       As you know, Medicare and Medicaid reimbursement policies 
     are considerably complex. Indeed, in correspondence from the 
     administrator of the Health Care Financing Authority 
     (``HCFA''), it was publicly noted in a letter addressed to 
     the Honorable Tom Bliley, Chairman, Commerce Committee, U.S. 
     House of Representatives, that HCFA has been ``actively 
     working to address drug payment issues, both legislatively 
     and through administrative actions, for many years.'' In 
     fact, Ms. DeParle, the HCFA Administrator, notes that her 
     Agency tried several alternative approaches in the early 
     1990's but that none were adopted. In fact, in 1997, the 
     Administration proposed to pay physicians and suppliers their 
     so-called ``acquisition costs'' for drugs, but the proposal 
     was not adopted. Instead, the Balanced Budget Act of 1997 
     reduced Medicare payments for covered drugs from 100% to 95% 
     of the average wholesale price or ``AWP''.
       From my perspective, it is the designing of a system to 
     replace the current system that to date has proven to be 
     difficult. Indeed, the current system has proven to be 
     untenable and we would welcome the opportunity of working 
     with you, Congress, HCFA, and any other interested regulatory 
     agencies and stakeholders to develop reimbursement guidelines 
     that are simple, transparent, and representative of the 
     current market conditions.
       Finally, I want you to know that--in accordance with your 
     request--I will share your letter and this response with the 
     members of Pharmacia's Public Issues and Social 
     Responsibility Committee of the Board of Directors. In 
     addition, Pharmacia will continue to participate 
     constructively in the public dialogue with regard to whether 
     changes will be made in this arena either legislatively or 
     through administrative action.
           Sincerely,
                                                      Fred Hassan.

     

                          ____________________