Ryan White CARE Act: Improved Oversight Needed to Ensure AIDS	 
Drug Assistance Programs Obtain Best Prices for Drugs (26-APR-06,
GAO-06-646).							 
                                                                 
The CARE Act authorized grants to the states and certain	 
territories for AIDS Drug Assistance Programs (ADAP) to purchase 
and provide HIV/AIDS drugs to eligible individuals. An ADAP's	 
coverage--who and what is covered--is determined by each ADAP's  
eligibility and other program criteria, and ADAPs may establish  
waiting lists for eligible individuals. ADAPs may purchase their 
drugs through the 340B federal drug pricing program, which	 
provides discounts on certain drugs to covered entities. The	 
Health Resources and Services Administration (HRSA) oversees	 
ADAPs and is responsible for monitoring the prices they pay. GAO 
was asked to examine (1) coverage differences among ADAPs, (2)	 
how the prices ADAPs reported paying for HIV/AIDS drugs compare  
to 340B prices, (3) how HRSA monitors the drug prices ADAPs pay, 
and (4) how the 340B prices compare to other selected federal	 
drug pricing programs.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-646 					        
    ACCNO:   A52580						        
  TITLE:     Ryan White CARE Act: Improved Oversight Needed to Ensure 
AIDS Drug Assistance Programs Obtain Best Prices for Drugs	 
     DATE:   04/26/2006 
  SUBJECT:   Acquired immunodeficiency syndrome 		 
	     Comparative analysis				 
	     Cost analysis					 
	     Eligibility criteria				 
	     Federal grants					 
	     Health care costs					 
	     Health care programs				 
	     Health policy					 
	     Prescription drugs 				 
	     Prices and pricing 				 
	     Procurement					 
	     Sexually transmitted diseases			 
	     AIDS Drug Assistance Program			 

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GAO-06-646

     

     * Background
          * ADAPs and the 340B Drug Pricing Program
          * Other Federal Drug Pricing Programs
     * Results in Brief
     * Variation in Program Design and Funding Contributes to Cover
          * Variation in ADAPs' Eligibility and Other Program Criteria C
          * Variation in Funding Amounts from Sources Other than the ADA
          * ADAPs with Waiting Lists Also Varied in Program Design and A
     * Some ADAPs Reported HIV/AIDS Drug Prices that Were Higher th
     * HRSA Does Not Routinely Determine Whether Drug Prices ADAPs
     * HIV/AIDS Drug Prices Are Sometimes Higher Under the 340B Pro
          * 340B Prices for Several Top 10 HIV/AIDS Drugs Were Higher th
          * Changes in Drug Prices Varied Widely Among HIV/AIDS Drugs an
     * Conclusions
     * Recommendations for Executive Action
     * Agency Comments and Our Evaluation
     * Background
     * Prenatal HIV Testing Encouraged to Reduce HIV Perinatal Tran
          * States Encourage Prenatal Testing of Pregnant Women to Help
          * Few States We Contacted Collect the Data Needed to Determine
     * Background
     * States Use Various Approaches to Elicit Information and Noti
          * States Conduct HIV Partner Notification Activities Using a V
          * States Primarily Use Interviews to Identify Partners and Var
          * Seven States Have Integrated HIV and STD Partner Notificatio
          * ADAP Coverage Differences Analysis
          * ADAP HIV/AIDS Drug Pricing Analysis
          * Prenatal HIV Testing and Perinatal HIV Transmission
          * Partner Notification of HIV Exposure
     * GAO Contact
     * Acknowledgements
     * GAO's Mission
     * Obtaining Copies of GAO Reports and Testimony
          * Order by Mail or Phone
     * To Report Fraud, Waste, and Abuse in Federal Programs
     * Congressional Relations
     * Public Affairs

Report to Congressional Requesters

United States Government Accountability Office

GAO

April 2006

RYAN WHITE CARE ACT

Improved Oversight Needed to Ensure AIDS Drug Assistance Programs Obtain
Best Prices for Drugs

GAO-06-646

Contents

Letter 1

Background 5
Results in Brief 11
Variation in Program Design and Funding Contributes to Coverage
Differences among ADAPs 13
Some ADAPs Reported HIV/AIDS Drug Prices that Were Higher than the 340B
Prices 31
HRSA Does Not Routinely Determine Whether Drug Prices ADAPs Report Paying
Are Higher than the 340B Prices 36
HIV/AIDS Drug Prices Are Sometimes Higher Under the 340B Program than Some
Federal Programs 38
Conclusions 42
Recommendations for Executive Action 43
Agency Comments and Our Evaluation 43
Appendix I Prenatal HIV Testing and Perinatal HIV Transmission Rates
within States 45
Background 45
Prenatal HIV Testing Encouraged to Reduce HIV Perinatal Transmission 46
Appendix II State Approaches to Identifying and Notifying Partners of
HIV-Infected Individuals of Possible HIV Exposure 49
Background 49
States Use Various Approaches to Elicit Information and Notify Partners of
Possible HIV Exposure 50
Appendix III Scope and Methodology 57
Appendix IV Comments from the Health Resources and Services Administration
63
Appendix V GAO Contact and Staff Acknowledgments 66
Related GAO Products 67

Tables

Table 1: Key CARE Act Title II Grants through which ADAPs May Receive
Funds 6
Table 2: ADAP Program Eligibility by Income Ceiling, Reported for ADAP
Grant Year 2004 15
Table 3: Program Eligibility and Other Criteria, Reported for ADAP Grant
Year 2004 17
Table 4: Number of Drugs Included in ADAP Formularies and ADAPs that Cover
Fuzeon, Reported for ADAP Grant Year 2004 20
Table 5: Additional ADAP Funding Sources and Amounts by ADAP, Fiscal Year
2004 22
Table 6: Total Additional ADAP Funding as a Percentage of the CARE Act
ADAP Base Grants and Total Additional Funding Per ELC by ADAP, Fiscal Year
2004 26
Table 7: ADAPs with Waiting Lists and Number of Months Each Had Waiting
Lists, Fiscal Year 2004 29
Table 8: Ranking of 13 ADAPs with Waiting Lists among the 46 ADAPs that
Received Additional Funding Per ELC; Fiscal Year 2004 31
Table 9: 25 340B Direct Purchase ADAPs that Reported Prices for the Top 10
HIV/AIDS Drugs that Were Above 340B Prices; 2003 33
Table 10: Ranking of Top 10 HIV/AIDS Drugs from Lowest (1) to Highest (5)
Unit Price Across Drug Programs; 2003 39
Table 11: Percentage of Unit Price Increases or Decreases from 2000 to
2003 for Top 10 HIV/AIDS Drugs 41

Abbreviations

ADAP AIDS Drug Assistance Program AIDS acquired immunodeficiency syndrome
AMP average manufacturer price CARE Act Ryan White Comprehensive AIDS
Resources Emergency Act of 1990 CDC Centers for Disease Control and
Prevention CMS Centers for Medicare & Medicaid Services ELC estimated
living AIDS case EMA eligible metropolitan area FCP federal ceiling price
FDA Food and Drug Administration FSS federal supply schedule HAART highly
active antiretroviral therapy HHS Department of Health and Human Services
HIV human immunodeficiency virus HRSA Health Resources and Services
Administration IOM Institute of Medicine NASTAD National Alliance of State
and Territorial AIDS Directors NDC national drug code OIG Office of
Inspector General OPA Office of Pharmacy Affairs PCRS partner counseling
and referral services STD sexually transmitted disease VA Department of
Veterans Affairs

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United States Government Accountability Office

Washington, DC 20548

April 26, 2006

The Honorable Michael B. Enzi Chairman Committee on Health, Education,
Labor, and Pensions United States Senate

The Honorable Mark E. Souder Chairman Subcommittee on Criminal Justice,
Drug Policy, and Human Resources Committee on Government Reform House of
Representatives

The Honorable Tom Coburn, M.D. The Honorable Judd Gregg United States
Senate

Since the first cases of acquired immunodeficiency syndrome (AIDS) were
identified in the United States nearly 25 years ago, advancements in
prescription drug treatments have significantly reduced AIDS mortality and
slowed the progression from a human immunodeficiency virus (HIV) -positive
diagnosis to AIDS.1 The introduction of combination drug treatments-highly
active antiretroviral therapy (HAART)-in 1996 was followed by a decline in
the number of AIDS deaths and new AIDS cases in the United States for the
first time since the beginning of the epidemic.2 While drug treatments
have extended the lifespan of those living with HIV/AIDS, the number of
new HIV infections has not decreased. The Department of Health and Human
Services's (HHS) Centers for Disease Control and Prevention (CDC)
estimates approximately 40,000 people are newly infected annually. CDC
also estimates that between 1,039,000 and 1,185,000 people in the United
States were living with HIV/AIDS at the end of 2003. The number of people
with HIV/AIDS is likely to have risen since then, and CDC estimates that,
as of December 2004, it included 415,193 individuals with AIDS.

1HIV is the virus that causes AIDS. Throughout this report, we use the
common term HIV/AIDS to refer to HIV disease, inclusive of cases that have
progressed to AIDS. When we use these terms alone, HIV refers to the
disease without the presence of AIDS, and AIDS refers exclusively to HIV
disease that has progressed to AIDS.

2HAART drug regimens usually combine three or more drugs and are used to
suppress the progression of the disease HIV/AIDS by reducing the amount of
the HIV virus in a person's blood. HAART therapy can cost about $12,000 or
more per person annually.

The Ryan White Comprehensive AIDS Resources Emergency Act of 1990 (CARE
Act),3 administered by HHS's Health Resources and Services Administration
(HRSA), was enacted to address the needs of jurisdictions, health care
providers, and people with HIV/AIDS and their family members.4 Title II of
the CARE Act5 authorizes AIDS Drug Assistance Program (ADAP) grants to
states, including the District of Columbia, and certain territories6
specifically to operate ADAPs. ADAPs purchase and provide HIV/AIDS drugs
to infected individuals who meet eligibility requirements. Each state and
territory is given broad authority under the CARE Act to design its own
program. The scope of an ADAP's coverage-who and what is covered-is
determined by each ADAP's program design, which includes criteria for who
is eligible to receive drugs, and other criteria such as the number and
types of drugs it will provide. There are no uniform program design
criteria across ADAPs.

ADAPs are a critical source of prescription drugs for low-income people
with HIV/AIDS who have no or limited prescription drug coverage and are
the programs of last resort for these individuals.7 In fiscal year 2005,
CARE Act funding for ADAP grants was $787.5 million. As the number of
people who know their HIV-positive status grows, the number of people with
HIV/AIDS needing to rely on ADAPs will likely increase. Some ADAPs have
struggled to meet the demand for their services. Limited resources have
contributed to ADAPs establishing waiting lists for eligible individuals
and taking other measures that restrict access.

3Pub. L. No. 101-381, 104 Stat. 576 (codified as amended at 42 U.S.C. S:S:
300ff-300ff-111 (2000)). Unless otherwise indicated, references to the
CARE Act are to current law.

4See also GAO, HIV/AIDS: Changes Needed to Improve the Distribution of
Ryan White CARE Act and Housing Funds, GAO-06-332 (Washington, D.C.: Feb.
28, 2006).

5The 1990 CARE Act added a new title XXVI to the Public Health Service
Act. In general, because Part A of that new title, which authorizes grants
to metropolitan areas, was established by Title I of the CARE Act, it is
commonly referred to as Title I, and because Part B, which authorizes
grants to states and territories, was established by Title II of the CARE
Act, it is commonly referred to as Title II.

6In addition to the 50 states, ADAP grants are authorized for the District
of Columbia, the Commonwealth of Puerto Rico, Guam, and the Virgin
Islands.

7ADAPs and other programs funded through CARE Act grants serve as the
payers of last resort for eligible individuals who have no other private
or public source available for the services they need. HRSA policy
provides that ADAPs are to identify and evaluate other potential sources
of payment for drugs to ensure that the ADAPs are the payers of last
resort.

Grants under Title II of the CARE Act are subject to conditions set out by
HRSA in the notice of grant award, including conditions related to ADAP
drug prices.8 One of these conditions identifies 340B drug prices as the
measure of ADAPs' economical use of grant funds. Under Section 340B of the
Public Health Service Act, drug manufacturers provide discounts on certain
outpatient drugs to covered entities;9 a 340B price, sometimes referred to
as a 340B ceiling price, is established for each covered drug that
entities purchase. ADAPs are allowed to purchase drugs through the Section
340B program and are required to submit quarterly HIV/AIDS drug pricing
reports to HRSA that indicate what they paid for drugs. Other federal drug
pricing programs are used by federal agencies to purchase HIV/AIDS drugs,
including the federal supply schedule (FSS) and federal ceiling price
(FCP) programs. State Medicaid programs receive rebates from drug
manufacturers for purchases of certain outpatient drugs including HIV/AIDS
drugs through the federal Medicaid drug rebate program. ADAPs are not
authorized by statute to purchase drugs under these other drug pricing
programs.

As Congress prepares for the reauthorization of CARE Act programs, you
asked us to examine certain aspects of ADAPs. Specifically, we are
reporting on (1) how each ADAP's program design and funding sources
contribute to differences in coverage among ADAPs, including those ADAPs
with waiting lists, (2) how the prices that ADAPs report to HRSA they paid
for HIV/AIDS drugs compare to the 340B prices, (3) how HRSA monitors the
drug prices ADAPs pay, and (4) how the 340B prices for HIV/AIDS drugs
compare to prices under selected federal drug pricing programs. You also
asked us to provide information on state prenatal HIV testing and
perinatal HIV transmission rates, and state approaches to identifying and
notifying partners of HIV-infected individuals; this information is
provided in appendixes I and II, respectively.

8Under the CARE Act, states and territories determine which drugs approved
by the Food and Drug Administration to include on their ADAP drug
formularies. Drug formularies are a preferred list of drug products that
typically limit the number of drugs available within a therapeutic class
for purposes of drug purchasing, dispensing, and reimbursement.

942 U.S.C. S: 256b (2000). Other entities eligible to purchase drugs
through the 340B program include, for example, community health centers,
hemophilia treatment centers, and HIV early intervention projects.

To report on these issues, we reviewed the 1990 CARE Act, and subsequent
amendments, HRSA policy manuals, HHS's Office of Inspector General (OIG)
reports on the CARE Act and ADAPs, Institute of Medicine (IOM) reports on
the CARE Act, and other related reports, and documents. We interviewed
HRSA and HHS OIG officials, as well as officials from the National
Alliance of State and Territorial AIDS Directors (NASTAD) and the
Association of State and Territorial Health Officials.

We reviewed 52 ADAPs to determine what program design elements contribute
to the coverage differences among ADAPs.10 We analyzed and compared data
ADAPs reported to HRSA for grant year 2004 on program design elements such
as eligibility income levels for individuals, enrollment caps, the number
of drugs covered, and funding from various sources during fiscal year
2004.11 We also analyzed and compared these data among ADAPs with waiting
lists of eligible individuals.

To compare the prices that ADAPs reported paying for HIV/AIDS drugs to
340B prices for such drugs, we first determined which HIV/AIDS drugs were
the top ten by ADAP expenditure using 2002 data, the most recently
available expenditure data at the time of our analysis. These drugs
accounted for 73 percent of ADAP drug spending. We then compared the
prices ADAPs reported paying for the top ten HIV/AIDS drugs to the 340B
program prices for those same drugs. For this comparison, we used the 2003
340B program prices and the purchase prices that 52 ADAPs provided in
their quarterly reports submitted to HRSA for 2003. At the time of our
analysis, 2003 was the most recent full year of ADAP drug price data.

To determine how HRSA monitors the prices ADAPs pay for HIV/AIDS drugs, we
interviewed HRSA officials. To determine how the 340B prices compare with
prices under selected federal drug pricing programs, we used the 2003
prices for the 340B drug pricing program from HRSA and compared them to
FSS and FCP program prices from the Department of Veterans Affairs (VA),
which administers these pricing programs. To determine how the 340B prices
compare with the Medicaid prices, we calculated prices state Medicaid
agencies paid including rebates states received under HHS's Centers for
Medicare & Medicaid Services' (CMS) Medicaid drug rebate program. We found
the data from these sources to be sufficient and reliable for our
analyses.

10Our analyses of ADAPs throughout this report include the 50 states, the
District of Columbia, and Puerto Rico.

11For our analyses, the ADAP grant year 2004 covered the period April 1,
2004, through March 31, 2005, and the fiscal year 2004 covered the period
October 1, 2003, through September 30, 2004.

Appendix III provides a more detailed explanation of the scope and
methodology for this report. We performed our work from July 2004 through
April 2006, in accordance with generally accepted government auditing
standards.

                                   Background

In 1990, Congress passed the CARE Act to address the needs of
jurisdictions, health care providers, and people with HIV/AIDS and their
family members. The CARE Act authorizes grants to eligible metropolitan
areas (EMA) under Title I, and to states and territories under Title II.12
Title II of the CARE Act authorizes the grants by which states and certain
territories receive funds specifically to operate ADAPs. ADAPs purchase
HIV/AIDS drugs for enrolled low-income people who are uninsured or
underinsured. Each state and territory is responsible for and has
significant flexibility in determining its ADAP eligibility criteria for
who receives services, the services it provides, and which drugs to
include in its formularies.

States and certain territories receive ADAP base grants distributed by a
formula based on each grantee's proportion of total estimated living AIDS
cases (ELC).13 The ADAP grant program, administered by HRSA's HIV/AIDS
Bureau, distributed $787.5 million or 38 percent of the about $2.1 billion
in CARE Act funding for fiscal year 2005. ADAPs may receive funds from
various other Title II grants awarded to states and territories, including
Title II base grants and Severe Need grants. (See table 1.) Severe Need
grants are made to states and certain territories with a need for funding
to increase access to drugs.

12EMAs are metropolitan areas with a population of at least 500,000 and
more than 2,000 reported AIDS cases in the last 5 calendar years.

13HRSA calculates a jurisdiction's ELCs by using data from the CDC on the
reported AIDS case counts for the last 10 years and weights those numbers
to account for the likelihood of deaths. See also GAO-06-332 for a
discussion of ELCs.

Table 1: Key CARE Act Title II Grants through which ADAPs May Receive
Funds

Grant      Purpose              Eligible grantees  Distribution            
Base Grant Support primary and  States and         Distributed based 80    
              home-based health    territoriesa       percent on each         
              care, insurance                         grantee's proportion of 
              coverage,                               all ELCs and 20 percent 
              medications, support                    on each grantee's       
              services, and early                     proportion of all ELCs  
              intervention                            located outside EMAs.b  
              services, such as                       Minimum grants of       
              HIV counseling,                         $200,000 are provided   
              testing, and                            for states with less    
              referral.                               than 90 ELCs; $500,000  
                                                      for states with 90 or   
                                                      more ELCs; and $50,000  
                                                      for territories.        
ADAP Base  Provide medications, States and certain Distributed based on    
Grant      drug treatment       territoriesd       each grantee's          
              adherence and                           proportion of all ELCs. 
              support efforts,c                       
              and health insurance                    
              coverage with                           
              prescription drug                       
              benefits.                               
Severe     Provide increased    States and certain Distributed based on    
Need Grant access to HIV/AIDS   territoriesd with  each grantee's          
              drugs.               a severe need for  proportion of all ELCs; 
                                   a grant to         grantees must agree to  
                                   increase access to match 25 percent of     
                                   medications.       their severe need grant 
                                                      and not to impose ADAP  
                                                      eligibility             
                                                      requirements stricter   
                                                      than those in place on  
                                                      January 1, 2000.e       

Source: HRSA.

aIn addition to the 50 states, base grants are authorized for the District
of Columbia, the Commonwealth of Puerto Rico, Guam, the Virgin Islands,
American Samoa, the Commonwealth of the Northern Mariana Islands, the
Republic of the Marshall Islands, the Federated States of Micronesia, and
the Republic of Palau.

bUnder Title I of the CARE Act, EMAs are metropolitan areas with a
population of at least 500,000 and more than 2,000 reported AIDS cases in
the last 5 calendar years.

cDrug treatment adherence and support efforts are intended to increase
individuals' ability to comply with the treatment regimen, for example, by
providing care for depression.

dIn addition to the 50 states, these grants are authorized for the
District of Columbia, the Commonwealth of Puerto Rico, Guam, and the
Virgin Islands.

eTo be eligible for a Severe Need grant, a jurisdiction must have met one
of four eligibility criteria as of January 1, 2000. It must have limited
(1) the eligibility of ADAP enrollees to those with incomes at or below
200 percent of the federal poverty level, (2) the number of ADAP enrollees
by using medical eligibility restrictions, (3) the number of
antiretroviral drugs covered in its drug formulary, or (4) the number of
opportunistic infection medications to less than 10 in its drug formulary.
(Opportunistic infections are illnesses such as parasitic, viral, and
fungal infections, and some types of cancer, some of which usually do not
cause disease in people with normal immune systems.) In addition, a
jurisdiction must also have agreed to provide a 25 percent match and not
impose eligibility requirements more restrictive than those in place on
January 1, 2000. According to HRSA, grantees can provide funds or in-kind
services to meet the matching requirements.

ADAPs serve as the HIV/AIDS drug assistance program of last resort for
individuals who, for example, cannot afford to pay for drugs, do not have
insurance coverage for drugs, or do not qualify for other federal programs
such as Medicaid that provide HIV/AIDS services to eligible individuals.
Medicaid is the largest source of federal funding for HIV/AIDS health care
services. In fiscal year 2005, Medicaid provided an estimated $5.7 billion
in HIV/AIDS health care assistance.14 Because Medicaid funds HIV/AIDS
health care services, including drugs, to eligible individuals, state
eligibility determinations for Medicaid are important in determining
eligibility for ADAPs that provide HIV/AIDS services as a last resort.15
Individuals who have received HIV/AIDS drugs through their state Medicaid
programs and who are dual eligibles-eligible for both Medicaid and
Medicare-will be affected by the Medicare Part D prescription drug benefit
implemented in January 2006. Rather than receiving their drug coverage
under Medicaid, dual eligibles will be covered by private insurance plans
provided through Part D. Since Medicaid drug benefits vary from state to
state, and Medicare Part D plans vary, which dual eligibles, if any, will
be able to receive ADAP drug coverage as a last resort will also vary.

Unlike Medicaid, under which states receive more federal funds when their
expenditures increase, due, for example, to greater enrollment, ADAPs do
not receive additional federal funds when they have more eligible
individuals than funds to provide services. When an ADAP cannot cover
everyone it determines is eligible for its services, it may, but is not
required to, establish a waiting list. ADAPs may establish waiting lists
anytime that they determine it is necessary and the number of ADAPs with
waiting lists is not constant. Since ADAPs may also cap the number of
individuals they are willing to enroll for services, the ADAPs with
waiting lists may not represent all eligible individuals who are not being
served. During fiscal year 2004, there were 14 ADAPs that reported having
waiting lists for at least part of the year.16

14Medicaid is a jointly funded federal-state health care program that
covers certain low-income families, and certain individuals who are aged
or disabled. By statutory formula, the federal government matches from 50
to 83 percent of each state's reported Medicaid expenditures for medical
assistance.

15Eligibility criteria for Medicaid programs vary among the states. States
have latitude within federal guidelines to design their individual
Medicaid programs with respect to eligibility, services, payment, and
whether to include prescription drug coverage. Although all state Medicaid
programs have drug coverage, the HIV/AIDS drug coverage provided varies
among states.

When eligible individuals are on ADAP waiting lists, there are limited
drug assistance options available to help those who qualify until they can
be served by the ADAP. If they do not qualify for these options, the
result can be an interruption of needed drug treatment. According to HHS's
HIV treatment guidelines, if an individual's HAART regimen is interrupted,
the individual can develop drug resistance upon resuming treatment.17
Individuals who develop drug resistance can transmit drug-resistant
strains of the HIV virus. Among the drug assistance options are
pharmaceutical manufacturers' patient assistance programs that provide
free or cost-reduced drugs, non-ADAP pharmacy assistance programs using
Title I funds,18 and state-sponsored pharmacy assistance programs. An
ADAP-eligible individual's ability to use these options may be limited by
factors such as availability in a particular state, financial and medical
eligibility criteria for the individual, and coverage duration.

  ADAPs and the 340B Drug Pricing Program

Section 340B of the Public Health Service Act requires drug manufacturers,
as a condition of their payment under Medicaid, to sign a pharmaceutical
pricing agreement with the Secretary of Health and Human Services. Drug
manufacturers agree to charge covered entities, including ADAPs, that
participate in the 340B drug pricing program prices for certain outpatient
drugs that do not exceed an amount determined by statutory formula-the
340B price.19 HRSA's Office of Pharmacy Affairs (OPA), within the
Healthcare Systems Bureau, administers the 340B

16Reliable data were not available to determine the number of unduplicated
individuals on waiting lists during a year or the length of time an
individual was on a waiting list before being served by the ADAP.

17HHS's Guidelines for the Use of Antiretroviral Agents in HIV-1-Infected
Adults and Adolescents generally recommend the HAART drug treatment, which
includes combination regimens of three drugs, and does not recommend
one-drug regimens. The guidelines are updated regularly.

18Under Title I of the CARE Act, HRSA provides grants to EMAs; some EMAs
use Title I grants to provide HIV/AIDS pharmaceutical assistance.

19If a drug manufacturer fails to sell drugs at or below the 340B prices,
it can be dropped as a participating drug provider in the 340B and
Medicaid programs.

program and calculates the 340B prices on a quarterly basis,20 which are
below the average manufacturer price (AMP).21 ADAPs are eligible to
participate in the 340B drug pricing program and receive 340B drug prices
for the HIV/AIDS drugs they cover.22 Like the other covered entities, an
ADAP's participation in the 340B program is voluntary-they may choose, for
example, to negotiate drug prices themselves with drug companies. For an
ADAP to purchase drugs through the 340B program, it must inform both OPA
and the HIV/AIDS Bureau's Division of Service Systems to activate its
status as a 340B covered entity.

ADAPs participating in the 340B program have options for how they purchase
drugs. Generally, ADAPs can purchase drugs through either the 340B direct
purchasing option (sometimes referred to as point-of-purchase) or through
the 340B rebate option. ADAPs choose one of these options when they
activate their status as a 340B entity. Under the direct purchase option,
ADAPs purchase drugs from drug manufacturers or through a third-party such
as a drug purchasing agent. Using the 340B direct purchase option, ADAPs
receive the 340B price discount up front. Under the rebate option, ADAPs
typically contract with entities such as a pharmacy network or pharmacy
benefits management company for the purchase of covered drugs. ADAPs later
request a 340B rebate from the drug manufacturers. ADAPs that have
activated their 340B status and are using the 340B direct purchase option
can also use the 340B prime vendor to negotiate for them.23 The prime
vendor assists covered entities by negotiating drug prices at or below the
340B drug prices. Participation in this program is voluntary, but ADAPs
that utilize the 340B rebate option or those that negotiate prices
themselves and do not participate in the 340B drug pricing program are not
eligible to participate in the prime vendor program.

20Prior to October 1, 2005, CMS calculated the 340B prices quarterly.

2142 U.S.C. S: 256b(a)(1) (2000). AMP is the average price paid to the
manufacturer for a drug by wholesalers for drugs distributed to the retail
pharmacy class of trade. 42 U.S.C. S: 1396r-8(k)(1) (2000). AMP is used to
calculate the 340B price and by CMS to calculate the Medicaid rebate-the
amount state Medicaid programs receive from drug manufacturers for covered
drugs through the federal Medicaid rebate program.

2242 U.S.C. S: 256b(a)(4)(E) (2000).

23Section 340B of the Public Health Service Act requires the Secretary of
Health and Human Services to establish a prime vendor program for 340B
covered entities. 42 U.S.C. S: 256b(a)(8) (2000).

Grants under Title II of the CARE Act are subject to conditions set out in
the notice of grant award, including conditions related to ADAP drug
prices. One of these conditions identifies 340B prices as the measure of
ADAPs' economical use of grant funds. Specifically, the notice states that
"HHS and Congress expect that states will use every means at their
disposal to secure the best price available for all products on their ADAP
formularies in order to achieve maximum results with these funds."
Further, the notice requires grantees to "adopt at least one defined
cost-saving practice for their ADAP program that is equal to or more
economical than the 340B Drug Pricing Program and its Prime Vendor
Program."24 For example, ADAPs may negotiate prices with drug
manufacturers that are at or below the 340B prices for the same drugs.
However, HHS does not disclose to ADAPs or the prime vendor what the 340B
prices are for the drugs they purchase because of statutory provisions
relating to the confidentiality of certain drug pricing information.25 All
ADAPs submit quarterly HIV/AIDS drug pricing reports to the HIV/AIDS
Bureau that indicate what they paid. The Bureau can request that OPA
compare the ADAP price reports to the 340B prices, but OPA does not share
its price comparisons with the Bureau due to the confidentiality of the
340B prices. If a state or territory does not comply with the grant
conditions, HRSA can either restrict the use of its current grant funds or
deny the state or territory future grant funds.

Other Federal Drug Pricing Programs

Federal agencies and state Medicaid programs purchase drugs subject to
other statutory provisions regarding prices. The FSS has prices available
to all federal government purchasers for the drugs listed on the schedule.
Another program, FCP, is the maximum price that drug manufacturers can
charge four agencies-the Department of Defense, the VA, the Public Health
Service, and the Coast Guard-for brand-name drugs listed on the FSS, even
if the FSS prices are higher.26 State Medicaid programs receive rebates on
their covered drugs, including HIV/AIDS drugs, through the federal
Medicaid drug rebate program. The minimum Medicaid rebate amount is 15.1
percent of AMP. ADAPs are not authorized to purchase drugs under these
drug pricing programs, except for the District of Columbia ADAP, which
purchases drugs using the FCP.

24Citing HHS policy that grantees must expend funds used for drug
purchases in the most economical manner feasible, HRSA requested comments
on a proposed requirement that all covered entities receiving grants
participate in, or demonstrate good cause for not participating in, the
340B program. 63 Fed. Reg. 56,656, 56,657 (Oct. 22, 1998). HRSA later
announced instead that, to increase participation in the 340B program, it
would add a statement in its notice of grant award on the need for
grantees to determine if their drug purchasing practices meet federal
requirements for reasonable and cost effective purchasing. 65 Fed. Reg.
6,383 (Feb. 9, 2000).

2542 U.S.C. S: 1396r-8(b)(3)(D) (2000).

                                Results in Brief

Variation in ADAPs' program design and funding amounts from the CARE Act
and other sources contributes to differences in coverage among the 52
ADAPs we reviewed. ADAP program eligibility and other design criteria,
including income ceilings, program enrollment caps, and drug formularies,
that states and territories establish vary considerably. For example, each
ADAP determines a maximum income level, or income ceiling, as a criterion
for an individual's eligibility for enrollment. ADAPs reported income
ceilings for the 2004 grant year that ranged from 125 percent of the
federal poverty level in North Carolina to 556 percent in Massachusetts.
Also, of the 52 ADAPs, 16 reported that they have limits on the assets
that individuals enrolled in the program are allowed to have. Twelve ADAPs
reported having caps on program enrollment or on amounts expended per
individual for HIV/AIDS drugs. The total number of drugs ADAPs included on
their formularies ranged from 20 in Colorado to 1,000 in Massachusetts,
New Hampshire, and New Jersey. Because of the variation in program
criteria, an individual eligible for ADAP services in one state may not be
eligible for services in another. The funding that some ADAPs reported
receiving from sources other than the ADAP base grant, such as transfers
from Title II base grants, and states' or other governmental entities'
funds, also varied among ADAPs for fiscal year 2004. Funding from these
various sources significantly increased funds available to cover
individuals for some ADAPs. For example, the California ADAP, which had an
ADAP base grant of about $89.6 million, received about $123.5 million in
total additional funding. Eligibility and other program design criteria
also varied among ADAPs that had waiting lists of eligible individuals in
fiscal year 2004, as did the amount and sources of additional funding for
those ADAPs.

26Drug manufacturers that do not make drugs available through the FSS and
FCP programs may not receive payments for drugs from Medicaid, certain
federal agencies, or any covered entity receiving funds under the Public
Health Service Act. 38 U.S.C. S: 8126(a)(4) (2000).

Some ADAPS reported prices to HRSA for some of the top 10 HIV/AIDS drugs
that were higher than the 340B program prices. Drug manufacturers that
agree to participate in the 340B drug pricing program agree to sell
HIV/AIDS drugs to 340B entities, including ADAPs that participate in the
program, at prices no higher than 340B prices. ADAPs are expected to
secure the best price available for drugs on their formularies whether
they use the 340B program, including the 340B prime vendor, or negotiate
drug prices on their own with drug manufacturers. In our analysis using
the top 10 HIV/AIDS drugs by ADAP expenditures, we found that in calendar
year 2003 all of the 25 ADAPs that used the 340B direct purchase option
reported prices to HRSA that were higher than the 340B price for at least
one of the top 10 drugs. For example, 7 of the 25 ADAPs reported
purchasing the drug Viramune at prices higher than the 340B price. Of the
27 ADAPs that used the 340B rebate option to purchase drugs in 2003, all
except 3 ADAPs reported paying drug prices that were higher than the 340B
prices for many of the top 10 drugs. However, the prices that ADAPs using
the rebate option report to HRSA for each drug they purchase may not
reflect the rebates that they eventually receive and therefore may not be
the final prices these ADAPs pay for the drugs.

Although HRSA is responsible for monitoring whether ADAPs are complying
with grant conditions, it does not routinely compare the drug prices ADAPs
pay to 340B prices. A HRSA HIV/AIDS Bureau official said that the Bureau
has occasionally asked OPA to compare the prices ADAPs report they paid
for drugs to the 340B prices and provide the results. Bureau and OPA
officials also said that they are discussing plans for OPA to begin making
routine comparisons of drug prices. However, the ADAP drug price
information that OPA currently uses to make its comparisons is not
complete. The prices ADAPs report paying do not include all rebates they
receive under the 340B rebate option. Also, OPA does not systematically
check whether the prices obtained by the 340B prime vendor program are at
or below the 340B prices. Without the final ADAP rebate amount on a drug
purchase, HRSA cannot determine whether the final drug prices paid were at
or below the 340B price.

The 340B program prices were higher for some of the top 10 drugs than the
340B prime vendor prices and the prices federal agencies paid for the same
drugs under the FSS and FCP drug pricing programs. Using the top 10
HIV/AIDS drugs by ADAP expenditures, we compared 2003 drug prices under
the 340B prime vendor, FSS, FCP, and Medicaid rebate drug pricing programs
to the 340B prices. We found that the FCP and 340B prime vendor prices
were lower than the 340B prices for 6 of the 7 drugs that had prices
available under all five programs. The 6 HIV/AIDS drugs were Combivir,
Epivir, Sustiva, Trizivir, Zerit, and Ziagen. The Medicaid rebate program
prices, available to state Medicaid programs, were the highest of all the
drug pricing programs for 3 of the 7 drugs for which we had prices from
all programs. The 3 drugs were Norvir, Sustiva, and Trizivir.

We are making recommendations to the Administrator of the Health Resources
and Services Administration to require that all ADAPs report final prices
they paid for drugs that reflect any discounts or rebates received, and to
routinely determine whether the prices ADAPs paid for the drugs they
purchased were at or below the 340B prices. In commenting on these
recommendations, HRSA stated that it would like to verify final drug
prices but this would be labor intensive because reports ADAPs currently
provide do not contain the needed information. HRSA further stated that it
lacks the resources to conduct a comprehensive price comparison, but is
making efforts to develop systems to allow ADAPs to check drug prices. We
believe that, while monitoring the prices paid for all the drugs on each
ADAP's formulary might be challenging, HRSA could use a cost-effective,
automated process to compare ADAP reported prices to 340B prices for
selected drugs and could modify its schedule of ADAP reports to allow for
rebate reconciliation.

  Variation in Program Design and Funding Contributes to Coverage Differences
                                  among ADAPs

The program eligibility and other criteria that ADAPs establish and
additional funding that some ADAPs receive vary and contribute to coverage
differences among the 52 ADAPs we reviewed. As a result, an individual
eligible for ADAP services in one state may not be eligible in another
state. Also, some of the ADAPs received funding from sources other than
ADAP base grants, such as Severe Need grants, transfers from Title I
grants or Title II base grants, and contributions from their state or
territory. The additional funding that some ADAPs received in fiscal year
2004 significantly increased funds available to support ADAP enrollees and
services. Eligibility and other program design criteria varied among ADAPs
that had waiting lists of eligible individuals in fiscal year 2004, as did
the amount and sources of additional funding for those ADAPs. This
variation among ADAPs with waiting lists contributes to coverage
differences, just as it does among all ADAPs.

Variation in ADAPs' Eligibility and Other Program Criteria Contributes to
Coverage Differences among ADAPs

ADAP program eligibility and other criteria, including income ceilings,
copayments, and drug formularies, that states and territories establish
vary considerably and contribute to coverage differences among ADAPs.
According to the National ADAP Monitoring Project,27 some ADAPs use these
criteria and others that can limit access to their services to contain
program costs. Because these criteria vary among ADAPs, a person
determined eligible and who receives certain ADAP services in one
jurisdiction may not be eligible or receive the same ADAP services in
another.

Income level is one program eligibility criterion that varies among ADAPs.
Each ADAP has an income ceiling, which is the maximum income an individual
can have and be eligible for the program. Among the 52 ADAPs included in
our review, income ceilings reported to HRSA for the 2004 grant year
ranged from the most restrictive at 125 percent of the federal poverty
level,28 or $11,638, in North Carolina to the most generous at 556
percent, or $51,764, in Massachusetts. (See table 2.) Eleven ADAPs had
income ceilings that were 200 percent or less of the federal poverty
level. Sixteen ADAPs reported income ceilings that were 400 percent or
greater than the federal poverty level.

27The National ADAP Monitoring Project, an initiative of the Henry J.
Kaiser Family Foundation and NASTAD, issues a report on its annual survey
of all jurisdictions receiving ADAP base grants. The survey provides data
on the status of ADAP programs and assesses key trends.

28The HHS 2004 federal poverty level for a single person was $9,310; the
poverty levels were higher for Alaska ($11,630) and Hawaii ($10,700). The
poverty level was not defined for Puerto Rico.

Table 2: ADAP Program Eligibility by Income Ceiling, Reported for ADAP
Grant Year 2004

                          Eligibility income ceiling and its percent of the
                                       federal poverty levela
ADAP                                 Dollars                       Percent
Alabama                                            $23,275             250 
Alaskab                                             34,890             300 
Arizona                                             27,930             300 
Arkansas                                            27,930             300 
California                                          37,240             400 
Colorado                                            27,930             300 
Connecticut                                         37,240             400 
Delaware                                            46,550             500 
District of Columbia                                37,240             400 
Florida                                             32,585             350 
Georgia                                             27,930             300 
Hawaiic                                             42,800             400 
Idaho                                               18,620             200 
Illinois                                            37,240             400 
Indiana                                             27,930             300 
Iowa                                                18,620             200 
Kansas                                              27,930             300 
Kentucky                                            27,930             300 
Louisiana                                           18,620             200 
Maine                                               27,930             300 
Maryland                                            37,240             400 
Massachusetts                                       51,764             556 
Michigan                                            41,895             450 
Minnesota                                           27,930             300 
Mississippi                                         37,240             400 
Missouri                                            27,930             300 
Montana                                             30,723             330 
Nebraska                                            18,620             200 
Nevada                                              37,240             400 
New Hampshire                                       27,930             300 
New Jersey                                          46,550             500 
New Mexico                                          27,930             300 
New York                                            45,340             487 
North Carolina                                      11,638             125 
North Dakota                                        37,240             400 
Ohio                                                46,550             500 
Oklahoma                                            18,620             200 
Oregon                                              18,620             200 
Pennsylvania                                        35,378             380 
Puerto Ricod                                        18,620             200 
Rhode Island                                        27,930             300 
South Carolina                                      27,930             300 
South Dakota                                        27,930             300 
Tennessee                                           27,930             300 
Texas                                               18,620             200 
Utah                                                37,240             400 
Vermont                                             18,620             200 
Virginia                                            27,930             300 
Washington                                          27,930             300 
West Virginia                                       23,275             250 
Wisconsin                                           27,930             300 
Wyoming                                             18,620             200 

Source: GAO analysis of ADAP data.

Note: The ADAP 2004 grant year covered April 1, 2004, through March 31,
2005.

aThe HHS 2004 federal poverty level for a single person was $9,310 except
as noted.

bThe HHS 2004 federal poverty level for Alaska was $11,630.

cThe HHS 2004 federal poverty level for Hawaii was $10,700.

dThe HHS 2004 federal poverty level was not defined for Puerto Rico; we
calculated the eligibility income ceiling for Puerto Rico by multiplying
Puerto Rico's 200 percent income ceiling by the federal poverty level of
$9,310.

Of the 52 ADAPs we reviewed, 29 reported to HRSA that their programs had
one or more program design limitations, which also contributed to coverage
differences among ADAPs for grant year 2004. These included a limit on an
individual's assets, copayment requirements, caps on program enrollment,
or caps on expenditures per individual enrollee. (See table 3.) Sixteen
ADAPs reported that they have a limit on assets that enrollees are allowed
to have, 9 reported having a copayment for drugs provided, 7 reported
having a cap on the number of individuals enrolled, and 5 reported having
a cap on amounts expended per enrollee for HIV/AIDS drugs. Eight ADAPs
reported using more than one of these criteria.

Table 3: Program Eligibility and Other Criteria, Reported for ADAP Grant
Year 2004

                                               Caps on                        
                  Enrollee asset              number of  Caps on expenditures 
ADAP            limitationa   Copaymentsb enrolleesc     per enrolleed
Alabama                                               
Alaska                                                
Arizona                                               
Arkansas                                       X      
California                         X                  
Colorado             X                         X      
Connecticut                                           
Delaware             X             X                  
District of          X                                
Columbia                                              
Florida              X                                
Georgia              X                                
Hawaii               X                                
Idaho                                          X               X           
Illinois                                                       X           
Indiana                                               
Iowa                                                  
Kansas                             X                  
Kentucky             X                                
Louisiana            X                                
Maine                                                 
Maryland                           X                  
Massachusetts                                         
Michigan                                              
Minnesota            X                                
Mississippi                                           
Missouri                                                       X           
Montana                                        X      
Nebraska                                              
Nevada               X                                
New Hampshire                                         
New Jersey                                            
New Mexico           X                                
New York             X                                
North Carolina                                 X      
North Dakota                                          
Ohio                                                  
Oklahoma                                       X               X           
Oregon               X             X                  
Pennsylvania                                          
Puerto Rico                                           
Rhode Island                                          
South Carolina                     X                  
South Dakota                                   X               X           
Tennessee            X                                
Texas                              X                  
Utah                 X             X                  
Vermont                                               
Virginia                                              
Washington           X             X                  
West Virginia                                         
Wisconsin                                             
Wyoming                                               
Total ADAPs          16            9           7               5           

Sources: GAO analysis of HRSA and ADAP data.

Note: The ADAP 2004 grant year covered April 1, 2004, through March 31,
2005.

aAn enrollee asset limitation is a maximum amount of assets, as defined by
each ADAP, that an individual may have and be eligible to receive drug
assistance from the respective ADAP. The asset limitations were reported
as either the ADAP had a limitation or it did not, or by the dollar amount
of the ADAP's limit. For those ADAPs reporting a dollar amount, the range
was from $2,500 in Colorado to $25,000 in Florida, Minnesota, and New
York.

bA copayment is money that an individual must pay to receive the ADAP's
drug assistance. The copayments were reported as either the ADAP had a
fixed or sliding scale copayment or it did not.

cThe cap on the number of enrollees is a maximum number of eligible
individuals who will be able to receive the ADAP's drug assistance. The
caps were reported as either the ADAP had a cap or it did not, or by the
number of ADAP enrollees allowed. For the 5 ADAPs that reported an
enrollee cap number, the range was from 75 in South Dakota to 3,600 in
North Carolina.

dA cap on expenditures per enrollee is the maximum dollar amount for drug
assistance that an ADAP will provide an eligible individual. The caps were
reported as either the ADAP had a cap or it did not, or by the dollar
amount of the ADAP's cap. For the five ADAPs that reported an expenditure
cap, the range was from $1,200 per month in Idaho to $24,000 per year in
Illinois.

The number and type of drugs covered under ADAPs' drug formularies vary
and can also contribute to coverage differences among ADAPs. ADAPs are not
required to cover particular drugs or a minimum number of drugs. The Food
and Drug Administration (FDA) has approved 27 HIV/AIDS drugs in four drug
classes.29 According to NASTAD, the majority of ADAPs cover several drugs
in three of the classes.30 In the ADAP 2004 grant year, 26 ADAPs reported
that they covered Fuzeon, which is the only FDA-approved drug in the
fourth class of drugs-fusion inhibitors.31 (See table 4.) The more drugs
an ADAP covers under its formulary, the more likely it is that eligible
individuals will receive the prescribed drugs they need, and that
individuals who develop resistance to a particular HIV/AIDS drug regimen
will have other drug treatment options available. In grant year 2004, the
number of drugs included in ADAPs' formularies ranged from 20 drugs in
Colorado to 1,000 drugs in Massachusetts, New Hampshire, and New Jersey.32
Thirty-nine ADAPs reported they had 100 or fewer drugs, including 15 with
fewer than 50 drugs on their formularies.

29The HIV/AIDS drug classes are protease inhibitors, nucleoside/nucleotide
reverse transcriptase inhibitors, non-nucleoside reverse transcriptase
inhibitors, and fusion inhibitors.

30National ADAP Monitoring Project's Annual Report (Washington, D.C.,
April 2005).

31Fuzeon is for individuals who have used other anti-HIV drugs but still
have ongoing HIV viral replication; it was approved by the FDA in 2003.
Fuzeon is to be used with a combination of medications for individuals
with limited treatment options.

32ADAPs may include in their formularies drugs to prevent or treat
opportunistic infections and other HIV-related conditions.

Table 4: Number of Drugs Included in ADAP Formularies and ADAPs that Cover
Fuzeon, Reported for ADAP Grant Year 2004

ADAPs                Drugs in formulary Fuzeon included 
Alabama                              32 
Alaska                               63 
Arizona                              46       Yes       
Arkansas                             46       Yes       
California                          152 
Colorado                             20 
Connecticut                         176       Yes       
Delaware                            241 
District of Columbia                 67 
Florida                              57       Yes       
Georgia                              51 
Hawaii                               89 
Idaho                                39 
Illinois                             74       Yes       
Indiana                              77       Yes       
Iowa                                 37       Yes       
Kansas                               52       Yes       
Kentucky                             45 
Louisiana                            21       Yes       
Maine                                36       Yes       
Maryland                             99       Yes       
Massachusetts                     1,000 
Michigan                            178       Yes       
Minnesota                           131 
Mississippi                          45       Yes       
Missouri                            272       Yes       
Montana                             105 
Nebraska                            100 
Nevada                               59 
New Hampshire                     1,000 
New Jersey                        1,000       Yes       
New Mexico                           65 
New York                            495       Yes       
North Carolina                       55       Yes       
North Dakota                         85 
Ohio                                 74 
Oklahoma                             48 
Oregon                               62       Yes       
Pennsylvania                        600       Yes       
Puerto Rico                          63 
Rhode Island                         65       Yes       
South Carolina                       52       Yes       
South Dakota                         41 
Tennessee                            80       Yes       
Texas                                31 
Utah                                 39       Yes       
Vermont                              80 
Virginia                             62       Yes       
Washington                          125       Yes       
West Virginia                        30 
Wisconsin                            67       Yes       
Wyoming                              73 
Total ADAPs                          52       26        

Sources: GAO analysis of HRSA and ADAP data.

Notes: Fuzeon is a fusion inhibitor medication for individuals who have
used other anti-HIV drugs but still have ongoing HIV viral replication; it
was approved by the FDA in 2003. Fuzeon is to be used with a combination
of medications for individuals with limited treatment options.

Variation in Funding Amounts from Sources Other than the ADAP Base Grant Can
Contribute to Coverage Differences among ADAPs

Most ADAPs received funding from various sources, in addition to ADAP base
grants. The amounts of funding and sources varied among ADAPs. The
additional funding that ADAPs received can contribute to differences in
the number of individuals served and the level of services provided. In
fiscal year 2004, 46 of 52 ADAPs we reviewed reported receiving additional
funds from sources that included Severe Need grants, transfers from Title
II base grants, transfers from Title I grants, contributions from the
state or territory, and other sources. Nineteen ADAPs received funds from
three or more of the additional funding sources. (See table 5.)

Table 5: Additional ADAP Funding Sources and Amounts by ADAP, Fiscal Year
2004

                Title II Severe                                                                                                           
                  Need granta                                                                                                             
                            State                                                                                                         
                         matching                                                                                                         
                            funds            Title I                                                                           
                              for  Title II    grant                                                                                Total
                           Severe      base transfer                                                                     Other additional
                  Severe     Need     grant     from                                                                   funding       ADAP
ADAP          Need grant    grant transferb     EMAc                           Contributions from jurisdiction fundsd sourcese    funding
Alabama              $824,913                $206,228          $0          0f   $2,500,000           $0   $3,531,141 
Alaska                      0                       0           0          0f       50,000            0       50,000 
Arizona                     0                       0           0           0    1,000,000       78,546    1,078,546 
Arkansas                   0g                      0g           0          0f      330,810      393,000      723,810 
California                 0g                      0g  12,168,628           0   63,934,245   47,370,750  123,473,623 
Colorado              660,427                 165,107     136,000     560,254      934,134    3,212,522    5,668,444 
Connecticut                0g                      0g           0           0      606,678            0      606,678 
Delaware                   0g                      0g           0          0f            0      832,382      832,382 
District of                                                                                                          
Columbia                   0g                      0g           0           0      400,000            0      400,000 
Florida                    0g                      0g   1,916,336           0    9,000,000            0   10,916,336 
Georgia             2,789,298                 697,324           0   1,540,022   11,305,339            0   16,331,983 
Hawaii                     0g                      0g           0          0f      440,535            0      440,535 
Idaho                  54,663                  13,666     261,150          0f      163,461      300,000      792,940 
Illinois                   0g                      0g           0           0    7,000,000    5,619,843   12,619,843 
Indiana                    0g                      0g   2,720,419          0f            0      102,331    2,822,750 
Iowa                        0                       0           0          0f            0            0            0 
Kansas                     0g                      0g           0        0f,h      400,000      550,000      950,000 
Kentucky              481,282                 120,320     100,000          0f       90,000      199,462      991,064 
Louisiana           1,628,705                 407,176           0           0            0      422,638    2,458,519 
Maine                       0                       0           0          0f       57,638      125,327      182,965 
Maryland                   0g                      0g      65,250     105,925            0    2,100,000    2,271,175 
Massachusetts              0g                      0g           0     104,819      747,990    1,900,000    2,788,809 
Michigan                   0g                      0g           0           0            0    5,500,000    5,500,000 
Minnesota                  0g                      0g           0           0    1,100,000    2,743,522    3,843,522 
Mississippi                0g                      0g   1,093,008          0f      750,000            0    1,843,008 
Missouri                   0g                      0g     771,167   1,549,422      669,000    1,913,547    4,921,136 
Montana                36,525                   9,131     178,548          0f            0        7,120      231,324 
Nebraska              130,445                  32,611      74,000          0f      115,938      160,000      512,994 
Nevada                     0g                      0g           0      65,250    1,350,947            0    1,416,197 
New Hampshire              0g                      0g           0        0f,h            0            0            0 
New Jersey                 0g                      0g           0           0            0   13,050,000   13,050,000 
New Mexico                 0g                      0g           0          0f            0            0            0 
New York                   0g                      0g   2,524,145   5,870,000   33,000,000   64,500,000  105,894,145 
North               1,511,429                 377,857           0          0f    8,355,195    3,338,000   13,582,481 
Carolina                                                                                                             
North Dakota                0                       0      85,400          0f            0       32,000      117,400 
Ohio                       0g                      0g           0     300,000        7,843       20,000      327,843 
Oklahoma              419,165                 104,791     486,486          0f      786,000      361,000    2,157,442 
Oregon                     0g                      0g           0           0      300,000    5,650,000    5,950,000 
Pennsylvania               0g                      0g           0           0   10,452,000    6,044,000   16,496,000 
Puerto Rico         2,661,337                      0i   3,455,671           0    2,093,000            0    8,210,008 
Rhode Island               0g                      0g           0          0f            0      700,000      700,000 
South               1,382,225                 345,556           0          0f      500,000            0    2,227,781 
Carolina                                                                                                             
South Dakota                0                       0     330,744          0f            0            0      330,744 
Tennessee                   0                       0           0          0f            0            0            0 
Texas               5,943,843               1,485,961     500,000           0   28,538,504            0   36,468,308 
Utah                        0                       0           0          0f            0            0            0 
Vermont                     0                       0           0          0f      175,000      130,000      305,000 
Virginia            1,707,470                 426,867           0           0    2,612,200            0    4,746,537 
Washington                 0g                      0g           0     800,487    4,842,484      925,000    6,567,971 
West Virginia         153,553                  38,388      75,000        0f,h            0      180,000      446,941 
Wisconsin             374,441                  93,610           0        0f,h      186,658      855,317    1,510,026 
Wyoming                    0g                      0g           0          0f            0            0            0 
Total             $20,759,721              $4,524,593 $26,941,952 $10,932,179 $194,795,599 $169,334,307 $427,288,351 

Sources: GAO analysis of HRSA and ADAP data.

aTo be eligible for a Severe Need grant, a jurisdiction must have met one
of four eligibility criteria as of January 1, 2000. It must have limited
(1) the eligibility of ADAP enrollees to those with incomes at or below
200 percent of the federal poverty level, (2) the number of ADAP enrollees
by using medical eligibility restrictions, (3) the number of
antiretroviral drugs covered in its drug formulary, or (4) the number of
opportunistic infection medications to less than 10 in its drug formulary.
(Opportunistic infections are illnesses such as parasitic, viral, and
fungal infections, and some types of cancer, some of which usually do not
cause disease in people with normal immune systems.) In addition, a
jurisdiction must also have agreed to provide a 25 percent match and not
impose eligibility requirements more restrictive than those in place on
January 1, 2000. According to HRSA, grantees can provide funds or in-kind
services to meet the matching requirements.

bThe Title II base grant transfers are CARE Act funds that were awarded to
the state or territory where the ADAP is located, and that the respective
state or territory decides to provide or transfer to the ADAP program.

cTitle I grant transfers from EMAs are CARE Act funds that were awarded to
EMAs in the state or territory where the ADAP is located, and that the EMA
decides to provide or transfer to the ADAP program.

dContributions from jurisdiction funds are additional funds provided by
the state or territory where the ADAP is located to the ADAP program.

eOther funding sources may include drug rebates ADAPs receive from
manufacturers against prices paid for drug purchases. These rebates do not
actually constitute additional funding. However, we were unable to
identify the amounts attributable to drug rebates in these ADAPs' reports.

fState did not have an EMA.

gState was not eligible for a grant.

hThe state did not have its own EMA but a portion of the state was
included in an EMA in another state.

iHRSA officials told us that the agency did not require Puerto Rico to
provide matching funds.

The number of ADAPs that reported receiving funding from sources other
than ADAP base grants and the amounts they received for fiscal year 2004
varied:

           o  Severe Need grants: Fifteen states and Puerto Rico received
           Severe Need grant funds for their ADAPs ranging from about $37,000
           in Montana to about $6 million in Texas.33 The total amount of
           funds from Severe Need grants these ADAPs received was about $20.8
           million.
           o  Title II base grant transfers: Eighteen ADAPs reported
           receiving transfers from their respective jurisdiction's Title II
           base grants. These transfers ranged from $65,250 in Maryland to
           about $12.2 million in California. The total amount of these
           transfers was about $26.9 million.
           o  Title I grant transfers from EMAs: Nine ADAPs reported
           receiving Title I fund transfers from the EMAs in their states
           ranging from $65,250 in Nevada to about $6 million for New York.
           The total amount of Title I grantee transfers was about $10.9
           million.
           o  Contributions from state and Puerto Rico funds: Thirty-five
           ADAPs reported receiving contributions from their respective
           jurisdiction's non-CARE Act funds ranging from about $8,000 in
           Ohio to about $64 million in California. For example, states can
           appropriate funds to be used by their respective ADAPs. The total
           amount of these contributions was about $194.8 million-the largest
           total amount received from the various sources.

           Other sources: Thirty-two ADAPs reported receiving funding from
           other sources34 ranging from about $7,000 in Montana to $64.5
           million in New York. The total amount of funds received from these
           sources was about $169.3 million.

           Among the ADAPs that reported receiving funding from sources other
           than ADAP base grants, the total dollar amounts received ranged
           from $50,000 in Alaska to about $123.5 million in California. Six
           ADAPs-Iowa, New Hampshire, New Mexico, Tennessee, Utah, and
           Wyoming-did not report receiving any additional funding.

           The amount of additional funding some ADAPs received significantly
           increased their funds available to support ADAP enrollees and
           services. The increases in funding per ELC and as a percent of the
           ADAP base grant varied among the ADAPs. (See table 6.) For
           example, the highest amount of additional funding received per ELC
           was $3,604, or 171 percent of the ADAP base grant, in Idaho. The
           lowest amount of additional funding received-excluding the 6 ADAPs
           with no additional funds-per ELC was $61, or 3 percent of the ADAP
           base grant, in the District of Columbia. Of the 46 ADAPs that
           received additional funding, 8 ADAPs-California, Colorado, Idaho,
           Minnesota, North Carolina, North Dakota, Oregon, and South
           Dakota-received total additional funding that was more than 100
           percent of the ADAP base grants to their states. Ten ADAPs-Alaska,
           Arizona, Connecticut, District of Columbia, Florida, Louisiana,
           Maryland, Massachusetts, Ohio, and South Carolina-received total
           additional funding that was less than 20 percent of the ADAP base
           grants to their states.

33There were 25 grantees eligible to receive ADAP Severe Need grants in
fiscal year 2004. To receive these grants, eligible grantees must agree to
match 25 percent of the funds. Of the 25 eligible grantees in fiscal year
2004, 16 received the grants, and 15 agreed to make the match. HRSA
awarded a grant to Puerto Rico but did not require it to provide matching
funds.

34Other funding sources may include drug rebates ADAPs receive from
manufacturers against prices paid for drug purchases. These rebates do not
actually constitute additional funding. However, we were unable to
identify the amounts attributable to drug rebates in these ADAPs' reports.

Table 6: Total Additional ADAP Funding as a Percentage of the CARE Act
ADAP Base Grants and Total Additional Funding Per ELC by ADAP, Fiscal Year
2004

                                                               Total     
                                                             additional  
                                           Total additional ADAP funding 
                                            ADAP funding as per ELC with 
                         Total                percentage of  rank among  
                    additional   ADAP base    the ADAP base   46 ADAPs   
ADAP           ADAP funding       grant            grant      Dollars Rank 
Alabama          $3,531,141  $7,004,635               50       $1,064   18 
Alaska               50,000     472,602               11          223   42 
Arizona           1,078,546   8,392,903               13          271   41 
Arkansas            723,810   3,116,716               23          494   34 
California      123,473,623  89,623,465              138        2,907    4 
Colorado          5,668,444   5,607,928              101        2,133    8 
Connecticut         606,678  11,315,018                5          113   44 
Delaware            832,382   3,202,722               26          548   32 
District of         400,000  13,842,594                3           61   46 
Columbia                                                              
Florida          10,916,336  80,386,630               14          287   40 
Georgia          16,331,983  23,684,951               69        1,455   14 
Hawaii              440,535   2,084,512               21          446   36 
Idaho               792,940     464,163              171        3,604    1 
Illinois         12,619,843  25,746,254               49        1,034   20 
Indiana           2,822,750   6,529,924               43          912   24 
Iowa                      0   1,305,985                0            0   -- 
Kansas              950,000   2,045,495               46          991   22 
Kentucky            991,064   4,086,741               24          512   33 
Louisiana         2,458,519  13,829,935               18          375   39 
Maine               182,965     833,383               22          463   35 
Maryland          2,271,175  25,746,254                9          186   43 
Massachusetts     2,788,809  14,684,416               19          401   37 
Michigan          5,500,000  11,002,763               50        1,055   19 
Minnesota         3,843,522   3,010,727              128        2,693    6 
Mississippi       1,843,008   5,795,703               32          671   30 
Missouri          4,921,136   7,409,723               66        1,401   15 
Montana             231,324     310,145               75        1,574   12 
Nebraska            512,994   1,107,661               46          977   23 
Nevada            1,416,197   4,738,678               30          631   31 
New Hampshire             0     755,319                0            0   -- 
New Jersey       13,050,000  34,877,598               37          789   25 
New Mexico                0   2,127,024                0            0   -- 
New York        105,894,145 124,956,784               85        1,788    9 
North Carolina   13,582,481  12,834,095              106        2,233    7 
North Dakota        117,400      92,543              127        2,730    5 
Ohio                327,843  10,909,930                3           63   45 
Oklahoma          2,157,442   3,655,707               59        1,279   17 
Oregon            5,950,000   4,225,989              141        2,971    3 
Pennsylvania     16,496,000  27,090,216               61        1,285   16 
Puerto Rico       8,210,008  22,598,388               36          767   27 
Rhode Island        700,000   1,911,506               37          773   26 
South Carolina    2,227,781  11,736,984               19          400   38 
South Dakota        330,744     204,654              162        3,410    2 
Tennessee                 0  12,018,438                0            0   -- 
Texas            36,468,308  50,471,351               72        1,524   13 
Utah                      0   1,980,565                0            0   -- 
Vermont             305,000     382,007               80        1,685   11 
Virginia          4,746,537  14,498,751               33          691   29 
Washington        6,567,971   7,966,718               82        1,739   10 
West Virginia       446,941   1,303,875               34          723   28 
Wisconsin         1,510,026   3,179,514               47        1,002   21 
Wyoming                   0     160,347                0            0   -- 
Total          $427,288,351           $              59%              
                               727,320,929                               

Sources: HRSA and GAO analysis.

Note: A dash indicates an ADAP that did not receive additional funding and
could not be ranked.

ADAPs with Waiting Lists Also Varied in Program Design and Additional Funding
Sources and Amounts

The eligibility and other program design criteria and additional funding
ADAPs received varied among ADAPs with waiting lists and can contribute to
coverage differences. When an ADAP cannot cover everyone it determines is
eligible for its services, it may, but is not required to, establish a
waiting list. HRSA's HIV/AIDS Bureau does not have guidance on what
conditions should trigger an ADAP to establish a waiting list. In fiscal
year 2004, 14 ADAPs had waiting lists of individuals they determined were
ADAP eligible but the programs were unable to serve.35 (See table 7.) Due
to the lack of reliable data on both the number of unduplicated
individuals on a list and the length of time individuals spend on waiting
lists, we could not determine, for example, the exact number of
individuals during a specific period who were on waiting lists. Based on
data ADAPs with waiting lists reported to HRSA for fiscal year 2004, the
average number of individuals on waiting lists for a particular ADAP and
among ADAPs varied.36 For example, Montana's monthly average ranged from 5
to 14 individuals during fiscal year 2004, while North Carolina's monthly
average ranged from 38 to 861. We do not know whether any ADAP turned away
individuals who would have been eligible without establishing a waiting
list.

35In 2005, HRSA reported that all ADAPs that maintained waiting lists
determined individuals' eligibility before placing them on the lists.
Maximizing Access to Medications through Efficient Use of CARE Act
Resources (Department of Health and Human Services, Health Resources and
Services Administration, HIV/AIDS Bureau, May 2005).

36The average number of individuals on a monthly waiting list could
represent the total number of individuals on the list during the entire
month, or the total number of individuals on the list at any time during
the entire month.

Table 7: ADAPs with Waiting Lists and Number of Months Each Had Waiting
Lists, Fiscal Year 2004

ADAPs          Number of Months 
Alabama                      12 
Alaska                       10 
Arkansas                      4 
Colorado                     10 
Idaho                         9 
Indiana                       2 
Iowa                          5 
Kentucky                     12 
Montana                      11 
Nebraska                      3 
North Carolina               12 
Oregon                        2 
South Dakota                 12 
West Virginia                12 

Sources: HRSA and GAO analysis.

Eligibility and other program design criteria reported for ADAP grant year
2004 varied among ADAPs with waiting lists. For example, for

           o  Income ceilings: Among the 14 ADAPs with waiting lists, income
           ceilings ranged from the most restrictive at 125 percent of the
           poverty level, or $11,638 in North Carolina to the most generous
           at 330 percent of the poverty level, or $30,723 in Montana.
           o  Enrollment and service caps: Among the 14 ADAPs with waiting
           lists, 6 ADAPs capped the number of enrollees, and two capped the
           amount they expend per individual for all HIV/AIDS drugs.
           o  Drug formularies: Among the 14 ADAPs with waiting lists, the
           total number of drugs on their formularies ranged from 20 drugs in
           Colorado to 105 drugs in Montana.

           In fiscal year 2004, the majority of ADAPs received funding from
           other sources in addition to ADAP base grants. The majority of
           ADAPs with waiting lists-13 of 14-also received additional
           funding. For example, for

           o  Severe Need grants: Among the 14 ADAPs with waiting lists, 8
           received funds from Severe Need grants.37 
           o  Title II base grant transfers: Among the 14 ADAPs with waiting
           lists, 8 received transfers of Title II base grant funds.
           o  Title I grant transfers from EMAs: Among the 14 ADAPs with
           waiting lists, only one ADAP-Colorado-received a Title I transfer.
           o  Contributions from state and Puerto Rico funds: Among the 14
           ADAPs with waiting lists, 9 received these contributions.
           o  Other sources: Among the 14 ADAPs with waiting lists, 10 ADAPs
           reported receiving funding from other sources.38,39 Among those 10
           ADAPs, the amount of funds from other sources ranged from about
           $7,000 in Montana to about $5.6 million in Oregon.

           Of the 13 ADAPs with waiting lists that received additional
           funding in fiscal year 2004, 5-Colorado, Idaho, North Carolina,
           Oregon, and South Dakota-were among the 10 ADAPs that received the
           most additional funding per ELC. (See table 8.) Idaho at $3,604
           per ELC, South Dakota at $3,410 per ELC, and Oregon at $2,971 per
           ELC respectively ranked the highest among the 46 ADAPs that
           received additional funding. The rank order of the remaining 10
           ADAPs with waiting lists among all ADAPs that received additional
           funding ranged from seventh-North Carolina at $2,233 per AIDS
           case-to forty-second-Alaska at $223 per ELC.

           Table 8: Ranking of 13 ADAPs with Waiting Lists among the 46 ADAPs
           that Received Additional Funding Per ELC; Fiscal Year 2004

           Sources: GAO analysis of HRSA and ADAP data.

           Some ADAPs reported prices to HRSA that they paid for some of the
           top 10 HIV/AIDS drugs purchased during 2003 that were higher than
           the 340B program prices.40 However, the reported prices may not be
           the final prices paid by ADAPs that receive rebates on the
           purchase price of their drugs. States and territories are expected
           to use every means at their disposal to secure the best price
           possible for HIV/AIDS drugs and are also required to adopt at
           least one cost-saving practice that is equal to or more economical

           than the 340B and prime vendor programs.41 While HRSA has
           identified 340B prices as the measure of cost effectiveness, HHS
           does not provide ADAPs with the 340B prices to use as a guide when
           purchasing HIV/AIDS drugs due to statutory provisions regarding
           the confidentiality of information used to determine them. Drug
           manufacturers that participate in the 340B program are aware of
           the 340B prices, and as a condition of their participation in the
           Medicaid program, have agreed to sell HIV/AIDS drugs to those
           ADAPs that use the 340B direct purchase or rebate options at
           prices no greater than the 340B prices.42 We found that among both
           the 25 ADAPs that used the direct purchase option and the 27 that
           used the rebate option to purchase their drugs in 2003, nearly all
           of the ADAPs reported drug prices that were higher than the 340B
           prices for at least one of the top 10 drugs.

           All of the 25 ADAPs that used the 340B direct purchase option to
           buy HIV/AIDS drugs in 2003 reported prices that were higher than
           the 340B prices for at least one of the top 10 HIV/AIDS drugs.43
           (See table 9.) For example, 7 ADAPs reported prices that were
           above the 340B price for Viramune. Three ADAPs reported prices
           that were more than the 340B price for at least 8 of the 10
           drugs-Delaware (10), Oklahoma (9), and Kentucky (8). All 25 ADAPs
           reported prices that were more than the 340B price for the drug
           Norvir. Since ADAPs are not provided the 340B prices, they may be
           unknowingly paying more than the 340B price for a drug.44 Because
           the 340B, the 340B prime vendor, the FCP, and Medicaid drug prices
           are not public, we indicate only whether a reported price is above
           the 340B price.

37Three states whose ADAPs had waiting lists were eligible to receive
Severe Need grants in fiscal year 2004, but did not apply.

38Other funding sources may include drug rebates ADAPs receive from
manufacturers against prices paid for drug purchases. These rebates do not
actually constitute additional funding. However, we were unable to
identify the amounts attributable to drug rebates in these ADAPs' reports.

39In June 2004, the President announced that $20 million would be used to
provide HIV/AIDS drug assistance to over 1,700 individuals then on ADAP
waiting lists in 10 states. The 10 ADAPs were in Alabama, Alaska,
Colorado, Idaho, Iowa, Kentucky, Montana, North Carolina, South Dakota,
and West Virginia. However, these funds were not distributed to the ADAPs.
HRSA contracted with Chronimed StatScript Pharmacy, a pharmaceutical
distributor, to provide the HIV/AIDS drugs directly to these individuals.
Chronimed began providing drugs in October 2004, the first month of fiscal
year 2005. The contract with Chronimed, now known as BioScript, was
extended by HRSA through March 2006 to allow the approximately $1 million
of remaining funds to be used.

                                    Rank among 46 ADAPs by                    
ADAPs with waiting lists that    additional funding per Additional funding 
received additional funding                         ELC            per ELC
Idaho                                                 1             $3,604 
South Dakota                                          2              3,410 
Oregon                                                3              2,971 
North Carolina                                        7              2,233 
Colorado                                              8              2,133 
Montana                                              12              1,574 
Alabama                                              18              1,064 
Nebraska                                             23                977 
Indiana                                              24                912 
West Virginia                                        28                723 
Kentucky                                             33                512 
Arkansas                                             34                494 
Alaska                                               42                223 

 Some ADAPs Reported HIV/AIDS Drug Prices that Were Higher than the 340B Prices

40The drugs were the top 10 drugs by expenditure that ADAPs purchased in
2002, the most current expenditure data available at the time of our
analysis. The expenditures for these 10 drugs represented 73 percent of
the total ADAP drug expenditures in 2002. The 10 drugs were Combivir,
Viracept, Sustiva, Norvir, Zerit, Trizivir, Epivir, Ziagen, Viramune, and
Viread. See appendix III for a more detailed description of our
methodology.

41A HRSA official told us in 2005 that four ADAPs-District of Columbia,
Kentucky, Michigan, and Pennsylvania-had special pricing arrangements
other than under the 340B program; these pricing arrangements were to be
at least equivalent to the 340B prices. The District of Columbia had
access to the FCP; Kentucky used a direct purchase option with a fixed
price contract; Michigan had a voluntary rebate agreement with drug
manufacturers; and Pennsylvania had a mandated drug manufacturer rebate.
As of February 2006, all ADAPs except the District of Columbia, which has
FCP access, were either 340B direct purchase or rebate ADAPs.

42If a drug manufacturer does not comply with the 340B program pricing
requirements, it can be dropped as a participating drug provider in the
340B and Medicaid programs.

43We received the 340B prices from HRSA for our analysis. The 340B drug
prices are not publicly available, so we do not report any pricing-related
information that would allow a specific drug's 340B price to be
determined. See appendix III for an explanation of our price comparison
methodology.

Table 9: 25 340B Direct Purchase ADAPs that Reported Prices for the Top 10
HIV/AIDS Drugs that Were Above 340B Prices; 2003

ADAP        Combivir Epivir Norvira Sustiva Trizivir Viracept Viramune Viread Zerit Ziagen 
Alabama                        X                                                    
Arizona                        X                                                    
Arkansas                       X       X                                 X          
Colorado                       X       X                                            
Delaware       X       X       X       X       X        X        X       X      X     X    
District of                    X                                N/A                 
Columbia                                                                            
Florida                        X                                                    
Georgia                        X                                                    
Hawaii                         X                                         X          
Iowa                           X                                                    
Illinois                       X                                 X                  
Kentucky       X       X       X               X        X       N/A      X      X     X    
Louisiana                      X                                                    
Mississippi                    X       X                                N/A         
Montana                        X                                         X          
Nebraska                       X                                                    
New Mexico     X       X       X                                 X              X     X    
Nevada                         X               X                                    
Ohio                           X                                                    
Oklahoma       X       X       X               X        X        X       X      X     X    
Puerto Rico                    X                                 X       X      X   
South                          X                                                    
Carolina                                                                            
Tennessee                      X                                 X                  
Texas                          X      N/A                       N/A                 
Virginia                       X                                 X                  
Total          4       4      25       4       4        3        7       7      5     4    

44In a general review of the 340B program, the HHS OIG testified that in
some cases drug manufacturers may not bill 340B covered entities the
correct 340B prices. The Department of Health and Human Services Office of
Inspector General, Testimony of Stuart Wright, Deputy Inspector General
for Evaluation and Inspections, on 340B Drug Pricing Program Oversight and
Administration, before the Subcommittee on Oversight and Investigations of
the U.S. House Committee on Energy and Commerce (Washington, D.C.:
Department of Health and Human Services, 2005.)

Sources: HRSA and GAO analysis.

N/A = ADAP did not purchase the drug.

Notes: An empty table cell indicates that the ADAP purchased the drug and
paid at or below the 340B price for that drug. To compare the prices that
ADAPs reported paying for HIV/AIDS drugs to 340B prices for such drugs, we
first determined which HIV/AIDS drugs were the top 10 by ADAP expenditure
using 2002 data, the most recently available expenditure data. We then
compared the prices ADAPs reported they paid for the top 10 HIV/AIDS drugs
to the 340B program prices for those same drugs. For this comparison, we
used the 2003 340B program prices and the purchase prices that 52 ADAPs
provided in their quarterly reports submitted to HRSA for 2003. At the
time of our analysis, 2003 was the most recent full calendar year of ADAP
drug price data.

aIn December 2003, Abbott Laboratories, the manufacturer of Norvir, an
HIV/AIDS protease inhibitor, substantially increased the wholesale price
per patient. In February 2004, Abbott Laboratories announced a permanent
Norvir price freeze for ADAPs at the price in place prior to the December
2003 re-pricing.

Among the 27 ADAPs that reported they used the 340B rebate option in 2003,
most reported prices for the top 10 HIV/AIDS drugs that were above the
340B prices. The 3 ADAPs that reported HIV/AIDS drug prices at or below
the 340B prices, and the number of drugs they purchased at these prices
were Kansas (3), Washington (3), and Pennsylvania (1). ADAPs using the
340B rebate option report the prices they paid for drugs to HRSA, but
these reports may not reflect the drug rebates ADAPs may eventually
receive that would determine the final amount paid for the drug. The ADAPs
that use the 340B rebate option almost always reported HIV/AIDS drug
prices higher than the 340B prices. An OPA official told us that there is
no reporting that reconciles the rebate savings an ADAP may receive
against the price it pays for a drug.

ADAPs that negotiate their own HIV/AIDS drug discounts with drug
manufacturers, or use the 340B prime vendor to negotiate drug discounts
for them, are expected to negotiate prices equal to or less than the 340B
prices.45 However, HHS does not disclose to the ADAPs or the 340B prime
vendor what the 340B prices are that they should not exceed. A HRSA
official told us that the ADAPs' and the 340B prime vendor's negotiating
position is disadvantaged because they rely on the drug manufacturers they
negotiate with to tell them whether the negotiated prices are equal to or
better than the 340B prices.

In 2003, 10 ADAPs joined together to negotiate HIV/AIDS drug prices
directly with drug manufacturers. These ADAPs formed a task force under
the auspices of NASTAD to directly negotiate drug prices with eight drug
manufacturers for HIV/AIDS antiretroviral drug discounts on behalf of all
ADAPs.46 According to the ADAP task force representatives we interviewed,
the negotiated drug discounts they agreed to were the total of the 340B
discount plus whatever additional discounts they could negotiate. The
representatives said that the discounts they agreed to were lower than
prices available under the 340B program, but we did not verify the
representatives' claim. The quarterly reports that ADAPs provide the
Bureau do not indicate whether a drug price is the result of negotiations
conducted by an ADAP or other options such as the 340B direct purchase or
rebate. All of these 10 ADAPs reported prices on their 2003 quarterly
reports that were more than the 340B price for at least 1 of the top 10
drugs.

45The 340B prime vendor assists 340B covered entities, including ADAPs
that use the 340B direct purchase option, by negotiating drug prices at or
below the 340B drug prices.

46The 10 ADAPs represented were: California, Florida, Hawaii, Illinois,
Maryland, Massachusetts, New Jersey, New York, North Carolina, and Texas.
All of the ADAPs except Hawaii and North Carolina were among the top ten
ADAPs based on total cumulative AIDS cases reported from the beginning of
the epidemic through December 2003. The eight drug manufacturers involved
in the negotiations were: Abbott Laboratories, Boehringer Ingelheim,
Bristol-Myers Squibb Company, Gilead Sciences, GlaxoSmithKline, Hoffman-La
Roche, Inc., Merck & Company, and Pfizer, Inc. The ADAP representatives in
these negotiations said that they negotiated on behalf of all ADAPs, not
just the 10 task force members, and each ADAP decided if it wanted to take
advantage of the negotiated prices.

 HRSA Does Not Routinely Determine Whether Drug Prices ADAPs Report Paying Are
                          Higher than the 340B Prices

HRSA's HIV/AIDS Bureau is responsible for monitoring grantees' compliance
with the conditions of their grants, including those related to HIV/AIDS
drug prices. HRSA does not routinely compare the HIV/AIDS drug prices
ADAPs report they pay to 340B program prices. When comparisons are made,
they may not be complete, because the prices ADAPs report paying may not
include all rebates they may receive under the 340B rebate option. If an
ADAP is found to be out of compliance, HRSA can restrict the ADAP's use of
its current funds or deny it future grant funds.

To monitor ADAP drug prices, a Bureau official told us that the Bureau had
only occasionally requested that ADAP drug prices be compared to the 340B
prices. For example, the Bureau has requested some spot checks rather than
conducting quarterly price comparisons using the ADAPs' quarterly drug
price reports. No Bureau official has access to the 340B price
information. HRSA's OPA administers the 340B drug pricing program,
including the 340B prime vendor program, and has access to the 340B prices
and the prime vendor's negotiated prices.47 Therefore, to determine how
ADAP reported prices compare to 340B prices, the Bureau has to request
that OPA make these price comparisons. When OPA makes the price
comparisons at the Bureau's request, the comparison results that OPA
provides indicate whether an ADAP reported price is below, above, or close
to the 340B price, or may show, for example, that a drug's price is within
a percentage range above or below the 340B price for that drug. According
to the Bureau and OPA officials, requests for these comparisons are not
routinely made by the Bureau.

The results of OPA price comparisons do not necessarily show whether final
prices paid by ADAPs using the rebate option are higher than the 340B
prices. According to HRSA officials, the drug prices reported paid by
ADAPs that use the rebate option are not reflective of the final prices
because they have not been reconciled by factoring in rebate savings.48 A
Bureau official and an OPA official stated that without the reconciled
ADAP rebate savings information on a particular drug purchased, it cannot
be determined whether the final drug prices paid are at or below the 340B
prices or whether ADAPs that use the rebate purchase option are paying
more than the 340B price for any drugs.

47An OPA official told us that OPA does not routinely monitor whether the
prices negotiated by the 340B prime vendor are at or below the 340B
prices, but plans to develop a monitoring system.

Based on its finding that HRSA did not conduct systematic monitoring of
340B prices, in December 2005, the HHS OIG recommended that HRSA develop
monitoring mechanisms to compare the 340B prices to the prices paid by
340B entities, which include ADAPs.49 During the course of our review,
Bureau and OPA officials told us that they were discussing plans for OPA
to begin making routine comparisons of the prices reported by the ADAPs to
the 340B prices. As of April 2006, final decisions have not been made
about when the comparisons will begin, how often they will be made during
a year, or whether the results will be shared with the ADAPs. If the price
comparisons do not include the rebates ADAPs receive and 340B prime vendor
prices, the comparisons cannot indicate whether the prices all ADAPs paid
for their drugs were at or below the 340B prices.

48ADAPs' financial data submitted to HRSA contain information on the total
expected rebate savings but not the rebate expected on the purchase of a
specific drug, which is the information needed to make drug price
comparisons to the 340B prices. ADAPs report the total amount of projected
drug rebates they expect to receive on their ADAP profile reports. The
rebates they report can include (1) the section 340B drug discount program
rebates, (2) negotiated rebates, and (3) the NASTAD task force negotiated
rebates. ADAPs can also report their sources of funding, such as rebates,
on another report-the ADAP quarterly data report. Neither report asks
ADAPs to list the amount of rebates they receive by drug or to provide
their rebate agreements.

49The Department of Health and Human Services Office of Inspector General,
Testimony of Stuart Wright, Deputy Inspector General for Evaluation and
Inspections, on 340B Drug Pricing Program Oversight and Administration,
before the Subcommittee on Oversight and Investigations of the U.S. House
Committee on Energy and Commerce (Washington, D.C.: Department of Health
and Human Services, 2005.)

HIV/AIDS Drug Prices Are Sometimes Higher Under the 340B Program than Some
                                Federal Programs

ADAPs that purchase HIV/AIDS drugs at the 340B prices paid more for some
of the top 10 drugs by expenditure than prices for these same drugs paid
under the 340B prime vendor program and prices federal agencies pay under
the FSS and FCP drug pricing programs. ADAPs paid less for their top 10
drugs than drugs purchased under the Medicaid program.50 ADAPs do not have
access to the federal drug pricing programs. In our comparison of drug
prices in 2000 to drug prices in 2003, all but one of the top 10 drug
prices that we included in our analysis increased under the 340B, FSS, and
FCP. During the same period, all top 10 drug prices for which we had data
available decreased under the Medicaid program.

340B Prices for Several Top 10 HIV/AIDS Drugs Were Higher than Prices Under
Other Federal Drug Pricing Programs

The results of our analysis show that the 340B prices paid in 2003 for
most of the top 10 HIV/AIDS drugs were higher than prices under the FCP
and 340B prime vendor programs, but lower than Medicaid prices.51 We
compared 2003 drug prices under four drug pricing programs-340B prime
vendor,52 FCP, FSS, and Medicaid rebate-to the 340B prices. Seven of the
top 10 HIV/AIDS drugs-Combivir, Epivir, Norvir, Sustiva, Trizivir, Zerit,
and Ziagen-had 2003 prices available for comparison under all five drug
pricing programs. The price comparisons are indicated by rank, rather than
by the drug prices, because the prices for the 340B, the 340B prime
vendor, the FCP, and Medicaid are not public. (See table 10.)

50For purposes of this report, the Medicaid price is the average amount
state Medicaid programs paid net of the basic rebate provided under the
Medicaid Drug Rebate Program.

51The drugs were the top 10 drugs by expenditure that ADAPs purchased in
2002, the most current expenditure data available at the time of our
analysis. The expenditures for these 10 drugs represented 73 percent of
the total ADAP drug expenditures in 2002. The 10 drugs were Combivir,
Viracept, Sustiva, Norvir, Zerit, Trizivir, Epivir, Ziagen, Viramune, and
Viread. See appendix III for an explanation of our price comparison
methodology.

52For purposes of this comparison, we have treated the 340B prime vendor
as a separate drug pricing program since it may have different prices than
the 340B prices for the same brand name drugs.

Table 10: Ranking of Top 10 HIV/AIDS Drugs from Lowest (1) to Highest (5)
Unit Price Across Drug Programs; 2003

                                                             Federal          
                                        340B prime  Federal   supply          
Top 10 HIV/AIDS drugs ranked    340B     vendor  ceiling schedule Medicaid
by ADAP expenditurea           price      price    price    price   priceb
Combivir                           3          2        1        5        4 
Viracept                           2        NPA      NPA        1        3 
Sustiva                            4          3        1        2        5 
Norvir                             1          4 2 (tied) 2 (tied)        5 
Zerit                              3          1        2        5        4 
Trizivir                           3          2        1        4        5 
Epivir                             3          2        1        5        4 
Ziagen                             3          2        1        5        4 
Viramune                           1        NPA      NPA      NPA      NPA 
Viread                             3        NPA        1        2        4 

Sources: GAO analysis of HRSA, VA, and CMS data.

NPA = no price was available for the drug.

Notes: The unit price for a drug is the price for a unit of the dosage
form and strength involved indicated by the National Drug Code (NDC). Each
FDA-approved drug has at least one NDC which is a universal product
identifier number for human drugs maintained by FDA. An NDC indicates a
drug's manufacturer or distributor, a drug's strength, dosage form and
formulation, and its package size. For the 10 drugs we used, we determined
the NDC for each drug that was most commonly purchased by 52 ADAPs, and
used the price for that NDC for our comparisons. For example, since
Sustiva has more than one NDC, we chose the Sustiva NDC that was most
commonly purchased by ADAPs to identify which of Sustiva's drug prices to
use for our comparison. For a drug marked NPA, there was no price
available using the NDC we identified under the drug pricing program. The
available 2003 prices were for brand name drug prices. The comparisons are
indicated by rank, rather than price, because only the FSS prices are
publicly available.

aThe drugs were the top 10 by ADAP drug expenditures for 2002, the most
recent expenditure data available at the time of the analysis.

bThe Medicaid price is the average amount state Medicaid programs paid net
of the basic rebate provided under the Medicaid Drug Rebate Program.

We found that for six of the seven drugs that had prices available under
all five programs-Combivir, Epivir, Sustiva, Trizivir, Zerit, and
Ziagen-FCP and the 340B prime vendor prices were lower than 340B prices.
The FSS price for one of the seven drugs-Sustiva-was lower than the 340B
price. Although some drug prices under FCP and FSS were lower than the
340B prices, ADAPs do not have access by statute to these two federal drug
pricing programs.53 The 340B price was the lowest for one of the seven
drugs-Norvir. Medicaid prices were the highest of all the pricing programs
for three of the seven drugs-Norvir, Sustiva, and Trizivir. (See table
10.)

Fuzeon is the only fusion inhibitor approved for individuals who have used
other anti-HIV drugs, but still have ongoing HIV-viral replication. It was
approved in 2003 by FDA, and was therefore not among the top 10 HIV/AIDS
drugs by ADAP expenditures for 2002 that we included in our analysis.
However, we compared the 2003 340B price for Fuzeon to prices under the
other pricing programs included in our analysis. In comparing the 2003
Fuzeon prices under the five drug pricing programs, we found that Fuzeon's
340B price was higher than both the FCP and FSS prices, but lower than
either the 340B prime vendor price or Medicaid price.

Changes in Drug Prices Varied Widely Among HIV/AIDS Drugs and Among Drug Pricing
Programs

We found wide variability in the percentage change in unit price among the
top 10 HIV/AIDS drugs and among the 340B, FCP, FSS, and Medicaid rebate
pricing programs.54 Because ADAPs provide drug coverage for eligible
individuals over longer periods due to improved drug treatments, and
increased life expectancy, the cost of HIV/AIDS drugs over time is an
important concern for ADAPs. We analyzed the changes in the prices of the
top 10 HIV/AIDS drugs under these programs by comparing the prices in 2000
to the prices in 2003. (See table 11.) From 2000 to 2003, all available
prices for the top 10 HIV/AIDS drugs increased under the 340B, FCP, and
FSS, except for Norvir which had a decrease in its 340B price.55 During
the same period, all available drug prices decreased under the Medicaid
program.

53The Institute of Medicine (IOM) and the HHS OIG have previously
recommended allowing ADAPs to purchase HIV/AIDS drugs at FCP drug discount
prices because those prices would be lower than the 340B prices. However,
both the IOM and OIG also raised concerns about whether drug companies
might be less willing to invest in HIV/AIDS drug research if they might
experience revenue losses from providing lower drug prices to additional
entities such as ADAPs. Institute of Medicine of the National Academies,
Public Financing and Delivery of HIV/AIDS Care: Securing the Legacy of
Ryan White (Washington, D.C.: The National Academies Press, 2005, and the
Department of Health and Human Services Office of Inspector General, AIDS
Drug Assistance Program Cost Containment Strategies (Washington, D.C.:
Department of Health and Human Services, 2000).

54The 340B prime vendor program was not included in this comparison
because drug prices for 2000 were not available.

55In December 2003, Abbott Laboratories, the manufacturer of Norvir, a
HIV/AIDS protease inhibitor, substantially increased the wholesale price
per patient. In February 2004, Abbott Laboratories announced a permanent
Norvir price freeze for ADAPs at the price in place prior to the December
2003 re-pricing.

Table 11: Percentage of Unit Price Increases or Decreases from 2000 to
2003 for Top 10 HIV/AIDS Drugs

Top 10 HIV/AIDS drugs                      Federal Federal supply Medicaid 
ranked by expenditurea    340B price ceiling price       schedule   priceb 
Combivir                        7.95         18.42           7.52    -5.94 
Viracept                      116.91           NPA            NPA    -1.56 
Sustiva                        16.60          1.93           1.78    -1.92 
Norvir                        -41.68          3.63           3.63   -13.77 
Zerit                           6.94         29.15          87.95   -11.66 
Trizivir                         NPA           NPA            NPA    -2.46 
Epivir                          7.90         24.84           7.53    -6.18 
Ziagen                          8.08          8.49           7.53    -5.48 
Viramune                      113.59           NPA            NPA      NPA 
Viread                           NPA           NPA            NPA 

Sources: GAO analysis of HRSA, VA, and CMS data.

NPA = no price was available for the drug.

Notes: The unit price for a drug is the price for a unit of the dosage
form and strength involved indicated by the National Drug Code (NDC). Each
FDA-approved drug has at least one NDC which is a universal product
identifier number for human drugs maintained by FDA. An NDC indicates a
drug's manufacturer or distributor, a drug's strength, dosage form and
formulation, and its package size. For the 10 drugs we used, we determined
the NDC for each drug that was most commonly purchased by 52 ADAPs in
2003, and used the price for that NDC for our comparisons. For example,
since Sustiva has more than one NDC, we chose the Sustiva NDC that was
most commonly purchased by ADAPs to identify which of Sustiva's drug
prices to use for our comparison. For a drug marked NPA, there was no
price available using the NDC we identified under the drug pricing program
for either 2000 or 2003 or both, so no calculations could be made. The
available 2000 and 2003 prices were for brand name drug prices. No 2000
prices were available for the 340B prime vendor.

aThe drugs were the top 10 by ADAP expenditures for 2002, the most recent
expenditure data available at the time of the analysis.

bThe Medicaid price is the average amount state Medicaid programs paid net
of the basic rebate provided under the Medicaid Drug Rebate Program.

AIDS Drug Assistance Programs All four drug pricing programs had prices
that we could compare for 6 of the 10 HIV/AIDS drugs-Combivir, Epivir,
Norvir, Sustiva, Zerit, and Ziagen. Among the four programs, the price
changes varied widely. Under both FCP and FSS, prices for the 6 drugs
increased between 2000 and 2003. The FCP price increases ranged from 1.93
percent for Sustiva to 29.15 percent for Zerit. The FSS price increases
ranged from 1.78 percent for Sustiva to 87.95 percent for Zerit. The FSS
had the lowest percentage increase in price from 2000 to 2003 for four of
the six drugs-Combivir, AIDS Drug Assistance Programs Epivir, Sustiva, and
Ziagen. Medicaid prices for all six drugs decreased with changes ranging
from -13.77 percent for Zerit to -1.92 for Sustiva. The 340B prices
increased for 5 of the 6 drugs-from 6.94 percent for Zerit to 16.60
percent for Sustiva, and decreased for 1 of the 6-Norvir-by -41.68
percent. 

Among the same 6 HIV/AIDS drugs, the price increases and decreases varied
widely among the drugs and by drug pricing program. For example, Combivir
prices ranged from its highest price increase-FCP's 18.42 percent-to its
only price decrease-Medicaid's -5.94 percent. Sustiva prices ranged from
its highest price increase-340B's 16.60 percent-to its only price
decrease-Medicaid's -1.92 percent. Norvir prices ranged from its only
highest price increase-FCP's and FSS's 3.63 percent-to its lowest price
decrease-340B's -41.68 percent. Zerit prices ranged from its highest price
increase-FCP's 87.95 percent-to its only price decrease-Medicaid's -11.66
percent.

                                  Conclusions

As the number of people with HIV/AIDS live longer due to improved drug
treatments, the demand for ADAP services will increase, and expenditures
by ADAPs for HIV/AIDS drugs will also likely increase. Therefore, it is
important that ADAPs achieve the maximum benefit with the funds provided
to them for drug purchases, and to do this, they have been given access to
the 340B program. However, HRSA does not systematically and routinely
determine whether ADAPs, particularly those using the 340B rebate option
or those that have negotiated drug prices, are acquiring drugs at prices
at or below the 340B prices. The HHS OIG has previously identified
shortcomings in HRSA's oversight of the 340B program and recommended that
HRSA verify manufacturers' calculations of 340B prices and monitor their
compliance with program requirements; HRSA acknowledged the need to
increase its oversight. HRSA also needs to determine whether ADAPs are
purchasing drugs at prices at or below the 340B prices. While monitoring
the prices paid for all the drugs on each ADAP's formulary might be
challenging, as some formularies have as many as 1,000 drugs, HRSA could
routinely compare ADAP reported prices to 340B prices for selected drugs.
For instance, all antiretrovirals could be compared, which would include
the top 10 drugs we used in our drug pricing analysis and which
represented 73 percent of the total ADAP drug expenditures in 2002.
Ensuring that the prices are reported on a schedule to allow for the
rebate reconciliation could also help HRSA to better monitor the final
prices paid for the drugs and to gauge whether ADAPs are achieving maximum
results with their grant funds.

                      Recommendations for Executive Action

To ensure that ADAPs are obtaining the best prices for drugs they provide,
we recommend that the Administrator of the Health Resources and Services
Administration take the following two actions:

           o  require that all ADAPs report final prices they paid for drugs,
           and that those final prices reflect any discounts or rebates
           received.
           o  routinely determine whether the prices ADAPs paid for the drugs
           they purchased were at or below the 340B prices.

           HRSA provided written comments on a draft of this report. HRSA
           commented that the report highlights a key issue facing ADAPs and
           HRSA in administering the program, but the agency raised concerns
           about its ability to implement our recommendations. The comments
           are reprinted in appendix IV.

           HRSA stated that it would like to verify final drug prices but
           this would be labor intensive because reports ADAPs currently
           provide do not contain the needed information. Specifically, HRSA
           noted that ADAPs may receive rebate checks many months after the
           drugs were purchased, which complicates the task of comparing
           prices. HRSA further stated that it is taking steps to develop the
           information it will require to determine whether the prices ADAPs
           paid for the drugs they purchased are at or below the 340B prices,
           but that it lacks the resources to conduct manual cost comparisons
           on a large scale. HRSA noted that it is making efforts to develop
           systems to allow ADAPs to check drug prices and that the agency
           has requested that drug manufacturers who participate in the 340B
           program voluntarily submit quarterly 340B prices on covered drugs
           to HRSA for comparison with the government computed 340B ceiling
           prices.

           As we stated in the draft report, ADAPs' financial data submitted
           to HRSA contain information on the total expected rebate savings
           but not the rebate expected on the purchase of a specific drug,
           which is the information needed to make drug price comparisons to
           the 340B prices. While we recognize that monitoring the prices
           paid for all the drugs on each ADAP's formulary might be
           challenging, HRSA could compare ADAP reported prices to 340B
           prices for selected drugs and could modify its schedule of ADAP
           reports to allow for rebate reconciliation. For example, HRSA
           could compare ADAP reported prices to 340B prices for all
           antiretrovirals, which would include the top 10 drugs we used in
           our drug pricing analysis and which represented over 70 percent of
           the total ADAP drug expenditures in a year. HRSA indicated that a
           manual comparison would be required, but in conducting our
           analysis we created a computer program that automatically compared
           information from the ADAP reports with the 340B prices, and HRSA
           could construct a similar cost-effective, automated process.
           Further, HRSA's plans to develop systems that allow ADAPs to check
           drug prices would be a useful tool in assisting the ADAPs to
           obtain the best prices, but would still not fulfill HRSA's
           responsibilities to oversee the programs to ensure compliance with
           the conditions of the grants. Given that we found ADAPs reported
           prices that were above the 340B prices, we believe that HRSA needs
           to take additional steps to monitor the program.

           HRSA also provided technical comments, which we have incorporated
           where appropriate.

           We are sending copies of this report to the Secretary of Health
           and Human Services, the Administrator of Health Resources and
           Services Administration, the Director of the Centers for Disease
           Control and Prevention, and to interested congressional
           committees. We will also make copies available to others upon
           request. In addition, the report will be available on GAO's Web
           site at http://www.gao.gov .

           If you or your staff have any questions about this report, please
           contact me at (202) 512-7119 or [email protected] . Contact points
           for our Offices of Congressional Relations and Public Affairs may
           be found on the last page of this report. GAO staff who made major
           contributions to this report are listed in appendix V.

           Marcia Crosse Director, Health Care

           In 2000, approximately 6,000 to 7,000 women infected with the
           human immunodeficiency virus (HIV), gave birth in the United
           States and an estimated 280 to 370 HIV-infected infants were born,
           according to the Centers for Disease Control and Prevention (CDC).
           When pregnant women are infected with HIV, they can transmit the
           virus to their infants during pregnancy, during labor and
           delivery, or after delivery through breast feeding. Antiretroviral
           therapy can reduce the risk of HIV transmission from mother to
           child. According to CDC, the prevention of perinatal HIV
           transmission depends on routine testing of pregnant women for HIV
           and the use of antiretroviral drug treatment and obstetrical
           interventions. This appendix provides information on prenatal HIV
           testing and perinatal HIV transmission rates in certain states
           with and without mandatory HIV testing of newborns.

           In 1994, a pediatric acquired immunodeficiency syndrome (AIDS)
           clinical trials study group demonstrated that the risk of HIV
           transmission from mother to child could be reduced by nearly 70
           percent if the antiretroviral drug, zidovudine, is administered to
           the mother during pregnancy, during labor and delivery, and to the
           baby after birth.1 In 1995, as a result of these findings, CDC
           issued guidelines calling for universal counseling of pregnant
           women about the risk of AIDS and the benefits of HIV testing. The
           guidelines recommended voluntary testing of all pregnant women and
           providing information about antiretroviral treatment for those
           women testing positive.2 In 1999, the Institute of Medicine (IOM)
           issued a report on preventing perinatal transmission of HIV.3 The
           report described factors that lead to perinatal transmission
           including the lack of prenatal HIV testing and antiretroviral
           therapy for HIV-infected women and HIV-exposed infants. IOM
           recommended that the U.S. adopt a national policy of universal HIV
           testing, with patient notification, as a routine component of
           prenatal care. Subsequent to this recommendation, in its 2001
           revised guidelines, CDC endorsed universal HIV testing as a
           routine part of prenatal care. Under CDC's prenatal HIV testing
           guidelines women would have the right to refuse HIV testing, and
           CDC makes it clear that existing state laws must be followed. In
           2005, the U.S. Preventive Services Task Force recommended that
           clinicians screen all pregnant women for HIV.4

           All 50 states, the District of Columbia, and Puerto Rico have
           policies or have enacted laws regarding HIV testing of pregnant
           women to help reduce perinatal HIV transmission. The majority of
           states have adopted a policy of voluntary testing of pregnant
           women that is consistent with CDC's guidelines. The eight states
           we contacted-California, Connecticut, Illinois, Louisiana,
           Michigan, New Jersey, New York, and North Carolina-use two
           approaches to testing pregnant women. Three states routinely
           include HIV tests in a standard battery of prenatal testing but a
           woman can refuse to be tested for HIV. In the other five states, a
           woman is counseled during prenatal care and must consent to an HIV
           test, usually in writing. Few states collect the data needed to
           determine statewide perinatal HIV transmission rates. Six of the
           eight states we contacted, however, reported that the number of
           HIV-positive newborns declined in their state from 1997 to 2002.

           All 50 states, the District of Columbia, and Puerto Rico have
           policies or have enacted laws regarding HIV testing of pregnant
           women to help reduce perinatal HIV transmission, and most are
           consistent with CDC's guidelines. CDC guidelines recommend HIV
           counseling and voluntary testing for all pregnant women and
           support a woman's right to refuse testing. According to a 2004
           report on state approaches to HIV testing for mothers and
           newborns, most states, the District of Columbia, and Puerto Rico
           rely on voluntary HIV testing that follows CDC guidelines.5 All
           eight states in our review require providers to give, or at least
           offer, pregnant women HIV counseling or information related to
           testing. Seven of the eight states have specific requirements that
           providers offer or perform HIV tests on pregnant women, but
           performing the test is contingent on obtaining informed consent.6

           Allowing pregnant women to opt-out of HIV testing is the approach
           to HIV testing that CDC recommends. Under this approach, pregnant
           women are notified that an HIV test is routinely included in the
           standard battery of prenatal tests for all pregnant women, but
           they can decline HIV testing. Officials from three of the eight
           states we contacted-California, North Carolina, and Michigan-said
           that their states use an opt-out approach. Officials from the
           remaining five states-Connecticut, Illinois, Louisiana, New
           Jersey, and New York-said their states use the opt-in approach.
           Under this approach, pregnant women typically receive HIV
           counseling during prenatal care but must specifically consent to
           an HIV antibody test, usually in writing. Connecticut and New York
           supplement the opt-in approach with mandatory newborn HIV testing
           requirements. CDC has stated that the opt-in approach is
           associated with lower testing rates than either the opt-out or the
           mandatory newborn HIV testing approach.7

           Connecticut and New York have enacted laws that require HIV
           testing of newborns. Under Connecticut's newborn testing law
           enacted in 1999, HIV testing must be offered to pregnant women and
           newborn testing is mandatory if the pregnant woman refuses to be
           tested.8 Under New York's newborn testing law enacted in 1997,
           newborns are required to be tested for HIV, regardless of whether
           the mother's HIV status is known. The testing is done with or
           without the mother's consent. Officials from Connecticut and New
           York told us that their mandatory newborn testing laws resulted in
           an increase in the number of pregnant women who were tested for
           HIV. A Connecticut official stated that the rate of HIV testing of
           pregnant women before the state's mandatory testing law passed was
           about 25 percent and since the law was enacted, the state's
           testing rate has increased to 90 percent or more. Similarly, New
           York officials told us that prenatal HIV testing has increased.
           Data on New York prenatal testing show that the prenatal HIV
           testing rate had increased from 64 percent in 1997 to 95 percent
           in 2003.

           Less than half of the states we contacted collected data
           sufficient to calculate a statewide perinatal HIV transmission
           rate in 2002.9 Of the eight states we contacted,
           three-Connecticut, New Jersey, and New York-reported data
           sufficient to calculate their statewide perinatal HIV transmission
           rate for 2002. The 2002 perinatal HIV transmission rates for these
           states were 0.0 percent, 3.0 percent, and 3.1 percent,
           respectively. One state, New Jersey, reported sufficient data that
           showed its perinatal HIV transmission rate declined from 13.3
           percent in 1997 to 3.0 percent in 2002. The perinatal transmission
           rates calculated for different states may not be directly
           comparable because of variations in the specific procedures used
           to collect or categorize the data. For example, while New York
           includes newborns who have had a single positive test for HIV in
           its count of HIV-positive newborns along with those newborns whose
           HIV-positive status has been confirmed by a second test, other
           states may use different approaches to collecting data.

           Although data collected by most of the states we contacted were
           not sufficient to calculate statewide perinatal HIV transmission
           rates, some states collected information on the number of
           HIV-positive newborns for the 2 years we inquired about. Six of
           the eight states we contacted-California, Connecticut, Michigan,
           North Carolina, New Jersey, and New York-reported that the number
           of HIV-positive newborns declined in their state in 2002 compared
           to 1997. Louisiana reported an increase in the number of
           HIV-positive newborns in 2002 compared to 1997. Louisiana
           officials said that the number of newborns with HIV in 1997 was
           unusually low. The change in the number of HIV-positive newborns
           from 1997 to 2002 was not reported by the remaining
           state-Illinois-because the data on HIV-positive newborns were not
           available for 1997.

           Research suggests that most new HIV infections originate from
           HIV-infected persons not yet aware of their infection.1 This
           emphasizes the need to identify HIV-infected persons and link them
           with appropriate services as soon as possible. The Ryan White CARE
           Act Amendments of 1996 provided for states to take action to
           require a good faith effort be made to notify spouses who may have
           been exposed to HIV.2 Partner counseling and referral services
           (PCRS) assist HIV-infected persons with notifying their partners,
           including spouses, of their exposure to HIV.3 This appendix
           provides information on state approaches to identifying and
           notifying partners of HIV-infected individuals of possible HIV
           exposure.

           In 1996, legislation amending the CARE Act also prohibited CARE
           Act grants to any state that did not take administrative or
           legislative action to require that a good faith effort be made to
           notify the spouse of an HIV-infected individual that he or she may
           have been exposed to HIV and should seek testing. CDC, in
           coordination with the Health Resources and Services Administration
           (HRSA), took the lead in determining state compliance with the
           requirement. In December 1996, CDC asked the states to certify
           compliance with the spousal notification requirement and to submit
           a summary of additional actions taken or planned for assuring that
           a good faith effort is made to notify spouses of a known
           HIV-infected person. Because states had been administering partner
           notification programs that included spouses for years,
           particularly programs for syphilis and other sexually transmitted
           diseases (STD), the actions states certified were both ongoing
           efforts and additions to their PCRS programs that were designed to
           specifically address the spousal notification requirements. In
           1997, CDC approved the certifications of compliance submitted by
           all states, the District of Columbia, and five territories.4

           In August 1999, the Department of Health and Human Services' (HHS)
           Office of Inspector General issued a report on state
           implementation of their CDC-approved plans for the spousal
           notification requirement.5 The HHS Inspector General reported that
           all 11 sampled states had followed up on the actions reported to
           and approved by CDC for compliance with the spousal notification
           requirement. For example, states were revising training materials,
           revising counseling guidelines, and retraining counselors based on
           the spousal notification requirement. Also, several states were
           undertaking promising notification efforts, according to the
           report. The HHS Inspector General recommended that states make
           additional efforts to ensure maximum notification while ensuring
           confidentiality.

           We contacted 12 states to determine what approaches they use to
           identify and notify partners of HIV-infected individuals.6 These
           12 states said they use various approaches in conducting HIV
           partner notification activities as part of their PCRS programs.
           These activities include eliciting partner information from known
           HIV-infected individuals-referred to as index cases7-and notifying
           the partners of their possible exposure to the virus. The states
           use a variety of entities and individuals trained to conduct these
           activities. Of the 12 states we contacted, 10 have statutory or
           regulatory provisions that require or permit certain health care
           entities or workers to notify partners without the consent of the
           index case. Some states reported integrating their HIV activities
           with established programs that are focused on syphilis and other
           STDs.

           Officials from all 12 states we contacted reported having PCRS
           programs that include eliciting information about the partners of
           individuals known to be infected with HIV, notifying the partners
           of their possible exposure to the virus, and providing the
           partners with counseling and testing services. Officials in all 12
           states said that they use public health care workers known as
           disease intervention specialists for conducting partner
           notification activities.8 Four states also use physicians; three
           states use community-based organizations; one state uses staff at
           counseling and testing sites; and one state uses staff working in
           jails to help conduct partner notification activities.

           Officials from all 12 states told us that the state provides
           training for the individuals who conduct partner notification
           activities for their PCRS programs. These individuals are trained
           to use various techniques for eliciting information from index
           cases, their partners, and their social associates, and for
           notifying partners of their possible exposure to HIV or other
           communicable diseases. Officials from all 12 states said they
           provide CDC-developed training and other training for disease
           intervention specialists.9 In addition, some state officials said
           they provide training to other groups that are involved in PCRS.
           For example, New York officials said that the state department of
           health conducts PCRS training with a variety of groups, including
           community-based organizations and staff working in jails, to
           improve their skills in eliciting information about partners.
           Massachusetts officials told us that they were training
           community-based organization staff in how to elicit partner
           information and notify exposed partners in an effort to integrate
           them into prevention services, and California officials said that
           they were training staff working at community-based organizations
           and disease counseling and testing sites.

           Generally, all 12 states use similar methods to obtain identifying
           information about partners of persons known to be infected with
           HIV and notifying the partners of their possible exposure to the
           virus. The states elicit information about HIV-exposed partners
           primarily through interviewing the index cases about their direct
           sex and needle-sharing partners. Some states also use interviews
           and a technique called clustering to identify social associates of
           the index case that may be at risk of exposure to HIV. In
           clustering, states may try to obtain information about things such
           as buildings where drug use occurs or other venues frequented by
           HIV-infected individuals. Because participation in PCRS is
           voluntary, some index cases may opt not to participate and may not
           provide information about their partners and other contacts. For
           example, New York officials we contacted said that the proportion
           of HIV index cases that do not provide partner identifying
           information is quite high. They do not know what percent of index
           cases refuse to divulge the information versus the health care
           provider's failure to ask or record the information. In 2003, New
           York City health care providers submitted 5,213 reports to the
           city's HIV Epidemiology Program that were completed on patients
           with a new diagnosis of HIV. Seventy-five percent of the reports
           did not list a partner of the newly diagnosed HIV-positive
           patients.

           Once partners are identified, states primarily use three
           CDC-suggested methods to notify them of their possible exposure to
           HIV.10 These methods are (1) client self-referral, in which index
           cases notify partners, (2) contract referral, in which a time
           frame is negotiated and agreed to with index cases for them to
           notify partners, and (3) provider referral, in which the health
           care provider or health department conducts the follow-up with
           partners.

           In all 12 states we contacted, index cases retain the option of
           notifying their partners that they have exposed them to HIV.
           Although they have this option, index cases may prefer to receive
           assistance from individuals trained in partner notification. For
           example, North Carolina officials said that most index cases
           prefer to have trained disease intervention specialists do the
           notification on their behalf because of concerns with confronting
           their partners about their HIV infection and having exposed them
           to the virus. When index cases opt to notify their partners, it is
           difficult for the health department to track whether partners
           indeed have been notified. Eight of the 12 states negotiate
           agreements with index cases that include, for example, that index
           cases will notify their partners by a certain date or the state
           may notify the partners. In Connecticut, such agreements are in
           writing and outline how partners will be informed, how it will be
           confirmed that partners were notified, and what follow-up is
           required when partner counseling and referral services are not
           provided.

           In all 12 states, health care providers or workers may notify
           partners. With this CDC-suggested method, index cases request
           provider assistance with partner notification and may give the
           provider identifying information such as addresses and phone
           numbers to follow-up with their partners. Research suggests that
           the use of health care providers or workers is more effective than
           the index cases notifying partners of their possible exposure to
           HIV.11

           Of the 12 states we contacted that conduct partner notifications,
           10 have statutory or regulatory provisions that require or permit
           certain health care workers or entities, such as physicians and
           health departments, to notify partners, including spouses, of
           their possible exposure to HIV without the consent of the index
           case.12 In New York, North Carolina, and Texas, statutory or
           regulatory provisions require that public health officials or
           health departments notify partners, including spouses,13 of their
           possible exposure to HIV. In California, Connecticut, Florida,
           Kentucky, Missouri, New York, Pennsylvania, and Washington the
           provisions permit health care providers, public health officials,
           or health departments to notify partners, including spouses, of
           their possible exposure to HIV.14 In California where physicians
           are permitted to notify partners, a California official told us
           that the health department is trying to get physicians more
           involved in partner notification but said that generally
           physicians do not have the time or staff to conduct the
           notifications. In the remaining 2 states-Massachusetts and
           Minnesota-public health officials or health departments may notify
           partners, including spouses, only with the consent of the index
           case. Moreover, Massachusetts has an HIV-specific confidentiality
           provision that explicitly prohibits health care providers and
           facilities from disclosing an individual's name or HIV test
           results without the individual's written informed consent.
           Massachusetts officials said that they believe the number of
           partners notified is lower in states with strict confidentiality
           laws compared to states without strict laws.

           Some states use the Internet as a tool for contacting and
           notifying partners of known HIV-infected individuals. A California
           official told us that the Internet provides a new opportunity to
           facilitate partner notification. Officials from Minnesota,
           Missouri, Pennsylvania, and Texas said they obtain information,
           such as Web site addresses and associated chat rooms that partners
           use, partners' screen names, and e-mail addresses, from index
           cases and use the Internet to initiate contact and send messages
           to partners. Officials from three states expressed concern about
           using the Internet and visiting certain Web sites to contact
           partners because of confidentiality concerns or provisions that
           prohibit employees from visiting sexually-oriented sites. The
           extent to which states use the Internet for HIV partner
           notification varies. For example, Kentucky, New York, and
           Washington State officials said that their use of the Internet is
           limited to certain geographic areas within the state.

           After partners are contacted and notified about their possible
           exposure to HIV, they are usually counseled about HIV and offered
           testing. CDC guidelines state that counseling should consist of
           providing a description of the ways in which HIV is transmitted,
           the importance of obtaining test results, the meaning of HIV test
           results, and ways to prevent future exposure to HIV. Officials
           from all 12 states we contacted said that disease intervention
           specialists that notify partners of their possible exposure to a
           communicable disease encourage them to get tested. Officials from
           these states said that when partners have been exposed to more
           than one communicable disease, such as syphilis and HIV, they will
           encourage partners to get tested for both diseases. Officials in
           California and Connecticut told us that when index cases are
           co-infected and want health department assistance with informing
           their partners about possible exposure to syphilis but not HIV,
           the partners will not be told about their exposure to HIV.
           Instead, the partners may be told that the risk behavior that
           exposed them to syphilis may have also exposed them to HIV and
           that getting tested for both is recommended.

           The participation of HIV index cases and partners in PCRS program
           activities varies among the states. As previously mentioned,
           participation in state PCRS is voluntary. New York officials told
           us that the number of index cases that do not provide partner
           identifying information is quite high, but they do not know what
           percentage of index cases refuse to divulge this information.
           Pennsylvania Department of Health officials told us that in 2004,
           there were over 300 HIV-positive cases in the state, and that 89,
           or less than one-third, used PCRS. A California state official
           told us that because the state does not use name-based reporting
           of individuals diagnosed with HIV, the state is not able to track
           those who received partner services and how many actually got
           tested. PCRS data collected by CDC show wide variability in
           elicitation and notification activities among states. Among 10 of
           the 12 states in our review,15 CDC data for 2002 show that the
           percentage of index cases interviewed for PCRS ranged from about
           46 percent to 100 percent. Similarly, the percentage of partners
           elicited who were located and notified ranged from about 42
           percent to 83 percent. Among partners who were located and
           notified, about 89 percent received counseling, and approximately
           90 percent of partners who were counseled were then tested for
           HIV.

           Health officials from 7 of the 12 states we contacted said they
           have combined certain activities in their HIV and STD programs to
           facilitate partner notification. In these 7 states, staff that
           conduct partner notification are trained in notifying partners of
           their exposure to HIV and other STDs. For example, Texas state
           public health officials said that their PCRS program integrates
           HIV and STD activities. They said a large percentage of their HIV
           cases are also infected with syphilis, and disease intervention
           specialists that are trained in all STDs can notify partners of
           their exposure regardless of the disease. In Texas, local health
           departments that have separate HIV and STD units have been
           encouraged to consolidate their efforts. Florida officials said
           that information from a syphilis outbreak among men who have sex
           with men shows that in 2004, 28 percent of these men were infected
           with HIV at the time they were diagnosed with syphilis. These
           officials said that from a resource standpoint, it does not make
           sense to have one person notify partners about their exposure to
           HIV and another person notify them about syphilis. Florida
           maximizes its resources by using the same staff to conduct all STD
           notifications. North Carolina health officials told us that their
           HIV and STD programs are totally integrated because it is hard to
           separate HIV and STD prevention efforts. North Carolina disease
           intervention specialists are trained in all STDs and can notify
           partners of their exposure to HIV and other STDs. Washington
           officials said that some, but not all, of their STD and HIV
           programs are integrated. In some jurisdictions the programs are
           divided while in others the staff is shared. They said that small
           health departments are more integrated because they cannot afford
           to have separate staff doing partner notification for the
           different diseases.

           The Ryan White Comprehensive AIDS Resources Emergency Act of 1990
           (CARE Act) authorized grants to states, territories, and
           metropolitan areas to provide health care, medications, and
           support services to individuals and families affected by AIDS. The
           CARE Act Amendments of 1996 authorized AIDS Drug Assistance
           Program (ADAP) grants for states, including the District of
           Columbia, and certain territories specifically to operate their
           own ADAPs to purchase and provide HIV/AIDS medications to eligible
           individuals. We examined how program design and funding sources
           contributed to differences in coverage-who and what is
           covered-among ADAPs, how the prices ADAPs reported paying for
           HIV/AIDS drugs compare to prices under the 340B program, how HRSA
           monitors the drug prices ADAPs pay, and how the 340B prices
           compare to selected other federal drug pricing programs. We also
           developed information on state prenatal HIV testing and perinatal
           HIV transmission rates and state approaches to identifying and
           notifying partners of HIV-infected individuals of possible
           exposure to HIV.

           To determine how program design and funding sources contributed to
           the coverage differences among 52 ADAPs in the states-including
           the District of Columbia-and Puerto Rico, we reviewed and
           summarized program eligibility criteria, including enrollment
           limitations, and funding sources available to ADAPs, including and
           in addition to the CARE Act ADAP base grants. We obtained data
           from ADAP profile reports submitted to HRSA by 52 ADAPs and
           analyzed the ADAP grant year 2004 data covering the period April
           1, 2004, through March 31, 2005. We did not verify the data
           reported by ADAPs. In our analysis of funding sources available to
           ADAPs, we determined the total amount of additional funding each
           ADAP reported for fiscal year 2004, and calculated the percentage
           that this total represented of each ADAP's fiscal year 2004 base
           grant. The percentages were then compared among the ADAPs to show
           which programs had more or less additional funding than their ADAP
           base grants. We also determined for each ADAP how much the total
           additional ADAP funding represented on a per estimated living AIDS
           case (ELC) basis.1

           To examine coverage for ADAPs with waiting lists, we used HRSA
           ADAP waiting list data for fiscal year 2004. When an ADAP has more
           eligible individuals than it has funds to provide services and
           cannot cover everyone it determines is eligible for its services,
           it may establish a waiting list. We determined that the available
           data were not reliable to establish the number of unduplicated
           individuals on waiting lists during a year or the length of time
           an individual was on a waiting list before being served by the
           ADAP, but this data were sufficiently reliable to indicate whether
           or not a waiting list existed and what were the average number of
           individuals on lists.

           For our ADAP drug pricing analysis, we used the top 10 HIV/AIDS
           drugs by expenditure among those purchased by ADAPs in 2002, the
           most current expenditure data available at the time of our review.
           The expenditures for these 10 drugs represented 73 percent of
           total ADAP drug expenditures in 2002. The 10 drugs were Combivir,
           Epivir, Norvir, Viracept, Sustiva, Trizivir, Viramune, Viread,
           Zerit, and Ziagen; these drugs are all brand name drugs.

           We used the purchase prices for these 10 drugs that 52 ADAPs
           provided on their quarterly drug pricing reports submitted to HRSA
           for 2003-the most recent full calendar year of ADAP drug price
           data available at the time of our analysis. ADAPs report the
           following data to HRSA for the drugs they purchase: (a) the drug
           by national drug code (NDC);2 (b) the quantity for a 30-day supply
           by units; (c) the unit price; (d) the total cost of the drug (the
           quantity by units multiplied by the unit price); (e) the
           dispensing fee; and (f) the gross price (the total cost of the
           drug plus the dispensing fee).

           To determine how the prices an ADAP reported it paid compared to
           the 340B price for any of the top 10 drugs it purchased in 2003,
           we compared each ADAP's 2003 average price over the four quarters
           to the 2003 340B price for the same drug. For each of the 10 drugs
           they purchased, each ADAP also reported that drug's NDC
           identifier. Because all ADAPs did not purchase the same version of
           the same drug, we used the NDCs each ADAP reported to determine
           which drug's price to compare to the 340B price. We then
           categorized the ADAPs by those using the 340B direct option, and
           those using the 340B rebate option, and determined how many drugs
           they reported at prices above the 340B prices. ADAPs that use the
           340B rebate option reported to HRSA the drug prices that they paid
           which may not reflect the drug rebate amount they may later have
           received from a drug manufacturer.

           To determine how the 340B prices for some HIV/AIDS drugs compared
           to prices available through selected federal drug pricing
           programs, we compared prices for the top 10 drugs across five
           federal drug pricing programs. We used the 2003 prices3 from the
           following federal drug pricing programs to make price comparisons:
           (a) the 340B prices provided by HRSA's Office of Pharmacy Affairs;
           (b) the 340B prime vendor negotiated prices provided by HRSA's
           Office of Pharmacy Affairs;4 (c) federal supply schedule (FSS)
           prices provided by the Department of Veterans Affairs (VA)
           Pharmacy Benefits Management; (d) the federal ceiling prices (FCP)
           provided by the VA Pharmacy Benefits Management; and (e) Medicaid
           prices5 that we calculated using publicly available pricing data
           and rebate data provided by the Centers for Medicare & Medicaid
           Services (CMS). Because a drug may have more than one NDC, ADAPs
           did not always report the same NDC for the same drug they
           purchased. For each of the 10 drugs, we determined the NDC that
           was most commonly purchased by 52 ADAPs during 2003.6 We used the
           10 most commonly purchased NDCs in 2003 for the price comparisons
           we did among the five federal drug pricing programs. However, the
           340B prime vendor, the FSS, the FCP, and Medicaid did not have
           prices for all 10 drugs. In addition some federal drug pricing
           programs did not have a price for a particular common NDC that
           could be used to compare prices across federal pricing programs.7
           Although we had the drug prices from all the federal drug pricing
           programs, only the FSS prices are publicly available. To prevent
           the possible calculation of a non-public drug price, we used
           rankings to indicate which drug pricing program had the lower
           prices for the drugs. We ranked a drug "1" under a particular drug
           pricing program when that program had the drug's lowest price for
           the drug across the drug pricing programs. We ranked a drug "5"
           when that program had the drug's highest price for the drug across
           the drug pricing programs.

           To determine whether the five federal drug pricing programs had
           price increases or decreases over time for the 10 drugs, we
           compared the prices in 2000 to the prices in 2003 for the ADAPs'
           most commonly purchased NDC for each drug in 2003 across the
           federal drug pricing programs. When a federal drug pricing program
           was missing a price for either 2000 or 2003 or both, no price
           comparison could be made. No price comparisons could be made for
           the 340 prime vendor prices because no 2000 drug price data were
           available. Some of the drug prices are not publicly available, so
           we reported only the drugs' percent of price increase or decrease
           so that a specific drug's price could not be determined.

           To assess the reliability of the drug pricing data from HRSA, VA,
           and CMS, we (1) reviewed existing documentation related to the
           data sources, and (2) electronically tested the data to identify
           any obvious problems with completeness or accuracy. We determined
           that the HIV/AIDS drug pricing data were sufficiently reliable for
           the purposes of this report.

           To develop information on state prenatal HIV testing and perinatal
           HIV transmission within states, we reviewed data on approaches
           that states use to test pregnant women and newborns for HIV and
           studies and reports by CDC, the Institute of Medicine, and various
           states related to prenatal testing for and perinatal transmission
           of HIV. We also requested prenatal HIV testing and perinatal HIV
           transmission data for 1997 and 2002,8 from eight
           states-California, Connecticut, Illinois, Louisiana, Michigan, New
           Jersey, New York, and North Carolina, to determine their statewide
           perinatal transmission rates. These states were selected based on
           (1) their high cumulative numbers of HIV infections among children
           as of 2002; (2) variations in the type of approaches they followed
           for HIV testing of pregnant women; and (3) geographic location. In
           addition, we interviewed officials from each of the eight states'
           departments of health to discuss prenatal testing for HIV and
           perinatal HIV transmission within the states. We used a definition
           of perinatal transmission rate that describes the frequency with
           which newborns contract HIV through exposure by pregnant women
           immediately preceding, during, or immediately following birth. We
           calculated statewide perinatal HIV transmission rates by dividing
           the number of newborns that tested positive for HIV by the number
           of live births to pregnant women that tested HIV positive. The
           majority of the eight states did not have complete data on
           prenatal HIV testing and perinatal HIV transmissions for the 2
           years we requested.

           To assess the reliability of data the eight states collected and
           provided to us, we reviewed the data for accuracy and completeness
           and discussed the information with state officials. We determined
           that data limitations, such as incomplete information on live
           births to pregnant women who tested HIV-positive, precluded us
           from accurately calculating statewide perinatal transmission rates
           for five of the eight states. We therefore report such data only
           for Connecticut, New Jersey, and New York.

           To determine what approaches states are using to identify and
           notify partners of HIV-infected individuals, we reviewed reports
           related to partner notification programs; reviewed and analyzed
           data from CDC's 2002 PCRS database and states' Web sites; and
           contacted 12 states in 2004 and 2005.9 Of the 12 states we
           contacted, seven-California, Florida, Massachusetts, Minnesota,
           New York, North Carolina, and Texas-were recommended by CDC and
           the National Alliance of State and Territorial AIDS Directors
           (NASTAD) because of their innovation in partner notification
           efforts. The other five states-Connecticut, Kentucky, Missouri,
           Pennsylvania, and Washington-were randomly selected. We
           interviewed officials from CDC, NASTAD, HRSA, and the 12 states.

           To assess the reliability of these data, we held discussions with
           CDC officials about the completeness and accuracy of the data in
           their databases and any limitations associated with the
           information. We also followed up with states about the accuracy of
           the data they provided. Based on our review of the data and
           discussions with CDC and state officials, we determined that CDC's
           2002 PCRS data and the data states provided were sufficiently
           reliable for the purposes of this report.

           We performed our work from June 2004 through April 2006, in
           accordance with generally accepted government auditing standards.

           Marcia Crosse, (202) 512-7119 or [email protected]

           In addition to the contact above, James McClyde, Assistant
           Director; Robert Copeland; Helen Desaulniers; Cathy Hamann; Martha
           Kelly; Daniel Ries; Opal Winebrenner; Craig Winslow; and Suzanne
           Worth made key contributions to this report.

           HIV/AIDS: Changes Needed to Improve the Distribution of Ryan White
           CARE Act and Housing Funds. GAO-06-332 . Washington, D.C.:
           February 28, 2006.

           Ryan White CARE Act: Factors that Impact HIV and AIDS Funding and
           Client Coverage. GAO-05-841T . Washington, D.C.: June 23, 2005.

           HIV/AIDS: Use of Ryan White CARE Act and Other Assistance Grant
           Funds. GAO/HEHS-00-54 . Washington, D.C.: March 1, 2000.

           HIV/AIDS Drugs: Funding Implications of New Combination Therapies
           for Federal and State Programs. GAO/HEHS-99-2 . Washington, D.C.:
           October 14, 1998.

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                       Agency Comments and Our Evaluation

Appendix I: PrePerinataStates Appendix I: Prenatal HIV Testing and
Perinatal HIV Transmission Rates within States

                                   Background

1E.M. Connor et al. "Reduction of Maternal-Infant Transmission of Human
Immunodeficiency Virus Type 1 with Zidovudine Treatment," The New England
Journal of Medicine, 331, 1173-80 (1994).

2Department of Health and Human Services, Centers for Disease Control and
Prevention, "U.S. Public Health Service Recommendations for Human
Immunodeficiency Virus Counseling and Voluntary Testing for Pregnant
Women," Morbidity and Mortality Weekly Report, vol. 44 (1995).

3Institute of Medicine, "Reducing the Odds: Preventing Perinatal
Transmissions of HIV in the United States," (National Academy Press,
Washington, D.C.: 1999).

      Prenatal HIV Testing Encouraged to Reduce HIV Perinatal Transmission

States Encourage Prenatal Testing of Pregnant Women to Help Reduce Perinatal HIV
Transmission

4The United States Preventive Services Task Force is a source of
recommendations and guidelines for screening tests, counseling,
immunizations, and use of medications for disease prevention. It is
composed of medical experts and sponsored by the Department of Health and
Human Services' Agency for Healthcare Research and Quality.

5The Henry J. Kaiser Family Foundation State Health Facts Online, "50
State Comparisons: HIV Testing for Mothers and Newborns, 2004."
http://www.statehealthfacts.org/cgi-bin/healthfacts.cgi?action=compare&category=HIV%2fAIDS&subcategory=HIV+Testing&topic=HIV+Testing+for+Mothers+and+Newborns
> (downloaded Jan. 19, 2006).

6Officials in the remaining state, Louisiana, said that in all of their
perinatal prevention efforts with providers they emphasize routine
offering of HIV tests as the standard of care supported by federal
guidelines.

7Centers for Disease Control and Prevention, "HIV Testing Among Pregnant
Women-United States and Canada, 1998-2001", Morbidity and Mortality Weekly
Report, vol. 51, no. 45 (2002).

8This mandatory testing requirement does not apply when parents object
based on conflicts with their religious tenets and practice.

Few States We Contacted Collect the Data Needed to Determine Statewide Perinatal
HIV Transmission Rates

9Perinatal transmission rate is defined as the frequency with which
newborns contract HIV through exposure by pregnant women immediately
preceding, during, or immediately following birth. We calculated statewide
perinatal HIV transmission rates by dividing the number of newborns that
tested positive for HIV by the number of live births to pregnant women
that tested HIV-positive.

Appendix II: St and NotiIndividua Appendix II: State Approaches to
Identifying and Notifying Partners of HIV-Infected Individuals of Possible
HIV Exposure

                                   Background

1G. Marks, N. Crepaz, J. W. Senterfitt, and R. S. Janssen, "United States:
Meta-Analysis of High-Risk Sexual Behavior in Persons Aware and Unaware
They Are Infected with HIV in the United States," Journal of Acquired
Immune Deficiency Syndromes, vol. 39, no. 4 (2005).

2Pub. L. No. 104-146, S: 8, 110 Stat. 1346, 1372 (codified at 42 U.S.C. S:
300ff-27a (2000)). The statute defines a spouse as "any individual who is
the married partner of an HIV-infected patient, or who has been the
married partner of that patient at any time within the 10-year period
prior to the diagnosis of HIV infection."

3CDC's PCRS guidance for HIV defines PCRS as a prevention activity with
the goals of (1) providing services to HIV-infected persons and their sex
and needle-sharing partners so they can avoid infection or prevent
transmission to others, and (2) helping partners gain earlier access to
individualized counseling, HIV testing, medical evaluation, treatment, and
other prevention services.

States Use Various Approaches to Elicit Information and Notify Partners of
                             Possible HIV Exposure

4The five territories included Guam, the Northern Mariana Islands, the
Republic of Palau, the Commonwealth of Puerto Rico, and the Virgin
Islands.

5Department of Health and Human Services Office of Inspector General, The
Ryan White CARE Act: Implementation of the Spousal Notification
Requirement (Washington, D.C.: Department of Health and Human Services,
1999).

6The 12 states we contacted were California, Connecticut, Florida,
Kentucky, Massachusetts, Minnesota, Missouri, New York, North Carolina,
Pennsylvania, Texas, and Washington.

7Index case is a generic term for a person who has tested positive for HIV
and is asked to name spouses and partners at the start of the notification
process.

States Conduct HIV Partner Notification Activities Using a Variety of Trained
Workers

8Disease intervention specialists interview patients, at-risk individuals,
and those infected with STDs (including HIV), and ensure appropriate
examination, treatment, and follow-up to persons exposed or infected with
an STD. Pennsylvania uses its field staff to perform duties similar to
those of disease intervention specialists in other states. In this report,
we refer to these Pennsylvania field staff as disease intervention
specialists.

9CDC training includes courses such as Introduction to STD Intervention,
Fundamentals of STD Intervention, and HIV Partner Counseling and Referral
Services.

States Primarily Use Interviews to Identify Partners and Various Methods to
Notify Them of Their Possible Exposure to HIV

10Centers for Disease Control and Prevention, Program Operations
Guidelines for STD Prevention: Partner Services (Atlanta, Ga.: Centers for
Disease Control and Prevention, 2001).

11Suzanne E. Landis et al., "Results of a Randomized Trial of Partner
Notification in Cases of HIV Infection in North Carolina," The New England
Journal of Medicine, vol. 326, no. 2, 101-106 (1992). Beth A. Macke and
Julie E. Maher, "Partner Notification in the United States: An
Evidence-Based Review," American Journal of Preventive Medicine, vol. 17,
no. 3, 230-242, (1999).

12In some of these states, physicians or health departments may notify
partners only when certain conditions are met, such as when the index case
has been advised to notify partners but refuses. Some states have
provisions also permitting parties other than health care providers or
health departments to notify partners.

13The North Carolina provision applies only to notification of spouses;
state officials told us that they generally notify partners with the
consent of the index case.

14One New York provision requires public health officials to notify
partners; another permits physicians to notify partners.

Seven States Have Integrated HIV and STD Partner Notification Activities and
Training

15CDC's 2002 PCRS data did not include data from Massachusetts and
Missouri. CDC told us that Massachusetts did not use its CDC HIV
prevention funds for PCRS so it was not required to report PCRS data.
Missouri's data did not pass CDC's reliability tests.

Appendix III: S Appendix III: Scope and Methodology

ADAP Coverage Differences Analysis

1HRSA calculates a jurisdiction's ELCs using data from CDC on the reported
AIDS case counts for the last 10 years and weights those numbers to
account for the likelihood of deaths. See also GAO, HIV/AIDS: Changes
Needed to Improve the Distribution of Ryan White CARE Act and Housing
Funds, GAO-06-332 (Washington, D.C.: Feb. 28, 2006) for a discussion of
ELCs.

ADAP HIV/AIDS Drug Pricing Analysis

2Each drug approved by the Food and Drug Administration has at least one
national drug code (NDC) which is a universal product identifier number
for a human drug. An NDC indicates a drug's manufacturer or distributor, a
drug's strength, dosage form and formulation, and its package size and
types.

3The 2003 price data were the most recent data available at the time of
our review.

4We treated the 340B prime vendor as a separate drug pricing program for
price comparison purposes. Section 340B of the Public Health Service Act
required the Secretary of Health and Human Services to establish a prime
vendor program for 340B covered entities. 42 U.S.C. S: 256(a)(8) (2000).
Because the prime vendor negotiates its own prices, it can have different
prices than the 340B prices for the same drugs.

5For purposes of this report, the Medicaid price is the average amount
state Medicaid programs paid net of the basic rebate provided under the
Medicaid Drug Rebate Program.

6For the 10 drugs we used, we determined which NDC for each drug that was
most commonly purchased by 52 ADAPs, and used the price for that NDC for
our comparisons. For example, since Sustiva has more than one NDC, we
chose the Sustiva NDC that was most commonly purchased by ADAPs to
identify which of Sustiva's drug prices to use for our comparison.

Prenatal HIV Testing and Perinatal HIV Transmission

7Even if a drug discount program had no price available for the most
commonly purchased NDC we used, it may have had prices for the same drug
under a different NDC than we used.

8Data for 2002 were the latest available at the time of our initial data
request.

Partner Notification of HIV Exposure

9The 12 states that we contacted were California, Connecticut, Florida,
Kentucky, Massachusetts, Minnesota, Missouri, New York, North Carolina,
Pennsylvania, Texas, and Washington.

Appendix IV: Comments from the Health and Resources and Services
Administration Appendix IV: Comments from the Health Resources and
Services Administration

Appendix V: A Appendix V: GAO Contact and Staff Acknowledgments

                                  GAO Contact

                                Acknowledgements

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For more information, contact Marcia Crosse at (202) 512-7119 or
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Highlights of GAO-06-646 , a report to congressional requesters

April 2006

RYAN WHITE CARE ACT

Improved Oversight Needed to Ensure AIDS Drug Assistance Programs Obtain
Best Prices for Drugs

The CARE Act authorized grants to the states and certain territories for
AIDS Drug Assistance Programs (ADAP) to purchase and provide HIV/AIDS
drugs to eligible individuals. An ADAP's coverage-who and what is
covered-is determined by each ADAP's eligibility and other program
criteria, and ADAPs may establish waiting lists for eligible individuals.
ADAPs may purchase their drugs through the 340B federal drug pricing
program, which provides discounts on certain drugs to covered entities.
The Health Resources and Services Administration (HRSA) oversees ADAPs and
is responsible for monitoring the prices they pay.

GAO was asked to examine (1) coverage differences among ADAPs, (2) how the
prices ADAPs reported paying for HIV/AIDS drugs compare to 340B prices,
(3) how HRSA monitors the drug prices ADAPs pay, and (4) how the 340B
prices compare to other selected federal drug pricing programs.

What GAO Recommends

GAO recommends that HRSA require ADAPs to report the final prices they
paid for drug purchases, net of rebates, and that HRSA routinely determine
whether these prices paid are at or below the 340B prices. HRSA stated
that these steps would be labor intensive and it lacks capacity to carry
out such oversight. We believe there are cost-effective processes HRSA
could use.

Variation in each ADAP's program design and funding from various sources
contributes to differences in coverage among the 52 ADAPs GAO reviewed.
Each ADAP has considerable flexibility in designing eligibility and other
program criteria to determine who will be covered by the program.
Consequently, an individual eligible for ADAP services in one state may
not be eligible for services in another. ADAPs varied in the extent to
which they received funding from sources in addition to the CARE Act ADAP
base grants, such as state funds or transfers of funds from other CARE Act
grants. Eligibility and other program design criteria also varied among
ADAPs that had waiting lists of eligible individuals in fiscal year 2004,
as did the amount and sources of additional funding for those ADAPs.

In their quarterly reports to HRSA, some ADAPs reported prices that were
above the 340B price for some of the 10 drugs GAO compared. These 10 drugs
accounted for 73 percent of ADAP drug spending. If ADAPs choose to use the
340B program, they may purchase drugs from manufacturers either through
the direct purchase option, receiving the 340B price up front, or through
the 340B rebate option, paying full price and receiving a rebate later.
The 340B prices are not disclosed to ADAPs, but participating
manufacturers agree to sell at the 340B prices. However, all 25 ADAPs that
used the 340B direct purchase option reported a price that was above the
340B price. All but 3 of the 27 ADAPs using the 340B rebate option
reported prices higher than the 340B price for one or more drugs. These
prices may not have been the final prices these ADAPs paid, however,
because they may not have included all rebates eventually received.

HRSA is responsible for monitoring whether ADAPs obtain the best prices
available for drugs. HRSA has identified the 340B prices as a measure of
an ADAP's economical use of grant funds. However, HRSA does not routinely
determine whether the prices ADAPs report are no higher than the 340B
prices. Also, quarterly reports do not reflect the rebates eventually
received by ADAPs using the rebate option to purchase drugs. Without
considering the final ADAP rebate amount on a drug purchase, HRSA cannot
determine whether the final drug prices paid were at or below the 340B
price.

ADAPs that purchase drugs at 340B prices paid more for some drugs than
certain federal agencies did for the same drugs under the federal ceiling
price program. ADAPs do not have access to this program. The 340B prices
were also higher than some of the prices available through the 340B prime
vendor program, which negotiates drug prices on behalf of participating
340B entities including ADAPs. The 340B prices, including the 340B prime
vendor prices, were lower than the Medicaid rebate program prices
available to state Medicaid programs, for each of the drugs GAO could
compare.
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