[Congressional Record (Bound Edition), Volume 149 (2003), Part 1]
[Extensions of Remarks]
[Pages 259-260]
[From the U.S. Government Publishing Office, www.gpo.gov]




     INTRODUCTION OF THE MEDICARE MARKET ACQUISITION DRUG PRICE ACT

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                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                        Tuesday, January 7, 2003

  Mr. STARK. Mr. Speaker, I rise today to introduce the Medicare Market 
Acquisition Drug Price Act. This bill would correct a long-standing and 
well-documented problem with the way Medicare pays for the few 
outpatient prescription drugs it covers today. This bill would save the 
government billions of dollars and lower cost-sharing for Medicare 
beneficiaries who are paying a substantial share of the industry's 
bloated prices today. Congress should enact this bill immediately.
  This problem must be resolved--this year--whether or not we succeed 
in creating a new Medicare prescription drug benefit. We have had 
hearings, we have had GAO and Inspector General reports, and we have 
had bipartisan consensus that this is a problem, but due to 
pharmaceutical industry efforts, we have had no congressional action. 
This problem was not addressed in the prescription drug legislation 
passed by the House Republican leadership last Congress. In the absence 
of congressional action, the Centers for Medicare and Medicaid 
Services, CMS, at the Department of Health and Human Services recently 
took modest steps to trim overpayments resulting from the current 
system. I applaud CMS's efforts and urge them to take any actions 
within their authority to ensure that Medicare pays reasonable prices 
for drugs.
  However, the ultimate solution to this problem requires legislation. 
Despite the House Republican leadership's persistent neglect of the 
issue, I believe there is bipartisan consensus that Medicare should not 
continue to pay exorbitant prices for prescription drugs. I urge my 
colleagues to join me in supporting this bill.
  Medicare currently pays for only a limited number of outpatient 
drugs, generally ones that a patient cannot self-administer, such as 
chemotherapy drugs. Medicare spends over $5 billion every year on these 
drugs. Under current rules, Medicare vastly over-pays for these drugs, 
because it bases payments on the artificially high ``average wholesale 
price,'' AWP, reported by the drug's manufacturer--regardless of the 
actual price a provider pays for the drug. There is abundant evidence 
that drug manufacturers have boosted their own drug sales and increased 
their profits, at great taxpayer expense, by manipulating the AWP of 
their drugs. Simply put, drug manufacturers report inflated prices, 
sell providers the drugs for much less, and then encourage providers to 
bill Medicare for the maximum allowable amount--95 percent of the 
inflated AWP reported by the manufacturer.
  This bill offers a straightforward solution to this problem. It would 
require Medicare payments to be based on the actual market prices at 
which manufacturers sell their drugs. This price, called the average 
acquisition price, would be verifiable. The Secretary would have the 
authority to audit drug companies' reports. Drug companies would be 
subject to steep fines for deliberately filing false or incomplete 
information.
  Mr. Speaker, the current Medicare AWP rules are a sham and must be 
changed. Consider the following:
  The General Accounting Office has described the AWT as ``neither 
`average' nor `wholesale;' it is simply a number assigned by the 
product's manufacturer.'' The GAO found that Medicare's payments for 
physician-administered outpatient drugs were at least $532 million 
higher than providers' potential acquisition costs in 2000. Similarly, 
the GAO found that Medicare paid at least $483 million more for 
supplier-billed drugs than suppliers' potential acquisition costs in 
2000. Some drugs were available at prices averaging less than 15 
percent of the manufacturer's reported AWP, while Medicare continued to 
pay 95 percent of AWP.
  In a real-life example, Mr. Bob Harper of Florida wrote to me about 
the high costs of one of his wife's chemotherapy drugs, Leucovorin. 
According to a September 2001 GAO report, this drug is widely available 
for just 14.4 percent of the AWP. Yet beneficiaries can be charged as 
much as 19 percent of the AWP--more than the actual price of the drug. 
Mr. Harper stated that his wife is being charged a co-payment of 
$155.27 for 36 treatments, or a total out-of-pocket charge of $5,589.72 
for this drug. As Mr. Harper said, ``This is outrageous!''
  The Office of the Inspector General, OIG, at the Department of Health 
and Human Services found that Medicare could save $761 million per year 
by paying the actual wholesale prices available to physicians and 
suppliers for just 24 of the outpatient drugs currently covered by 
Medicare.
  Numerous states, consumer groups, and private health plans have sued 
drug manufacturers for fraudulently inflating Medicare drug prices.
  These suits follow on the heels of a record Medicare and Medicaid 
fraud settlement by TAP Pharmaceutical Products. In October 2001, TAP 
pleaded guilty to a charge of conspiracy to violate federal law. TAP 
agreed to pay $875 million--the largest criminal fine ever levied by 
the government for health care fraud--to settle the suit, in which the 
government alleged the company artificially inflated the AWP of the 
company's prostate cancer drug Lupron.
  In October 2002, the OIG issued draft compliance program guidance to 
pharmaceutical companies. This guidance specifically highlighted 
pharmaceutical companies' manipulation of the average wholesale price 
as fraudulent behavior: ``A pharmaceutical manufacturer's purposeful 
manipulation of the AWP to increase its customers' profits by 
increasing the amount the Federal health care programs reimburse its 
customers implicates the anti-kickback statute.''
  Mr. Speaker, the problem is well known. The solution is 
straightforward. Both the GAO and the OIG have recommended that we 
revise Medicare's drug payment policies to reflect actual market 
prices, accounting for rebates and other discounts available from 
manufacturers. That is exactly what this bill does.
  Manufacturers would be required to report the actual average market 
acquisition prices for their drugs as a condition for Medicare coverage 
of those drugs. Each manufacturer would have to certify the accuracy of 
its reports and the Secretary of HHS would be empowered to audit price 
information to verify the accuracy of the reports. Drug manufacturers 
would be subject to unlimited civil monetary penalties for filing false 
reports and would be subject to a penalty of $100,000 for each day they 
fail to provide timely information.
  The bill is also carefully crafted to ensure that the reimbursement 
revisions will not adversely impact Medicare beneficiaries' access to 
care. First, to ensure these drugs are available in areas of the 
country where providers must purchase covered drugs at prices above the 
average, the actual reimbursement level to providers would be set 5 
percent above the average acquisition price. Second, Medicare would pay 
dispensing fees to reflect differences in the costs of dispensing 
different drugs and biologics. Third, the bill would ensure continued 
access to cancer treatment. Oncologists have argued that inflated AWP 
reimbursements are necessary to compensate

[[Page 260]]

for the administration of cancer medicines. This bill would correct 
this anomaly by revising Medicare payments for oncology services to 
appropriately account for these indirect costs, in accordance with GAO 
recommendations.
  Mr. Speaker, I sincerely hope that Congress will act to provide a 
meaningful Medicare prescription drug benefit this year. On top of the 
many other serious concerns I have with the so-called drug benefit 
bills offered by the Republican leadership in recent years, I am deeply 
disappointed that they have not addressed the abuses of the current AWP 
system. We must not shirk our responsibility to ensure that Medicare 
properly pays for the limited outpatient prescription drugs it already 
covers. There is no need for taxpayers to continue to fill 
pharmaceutical companies' coffers with the ill-gotten gains of the 
current AWP system. I hope all of my colleagues will join me in passing 
this important legislation.

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