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Executive Summary

TEXAS MEDICAID VOLUME DRUG PURCHASING project will be monitored for effectiveness by the HHS Office of the Inspector General. According to the Inspector General's "Work Plan" for fiscal 1988-1989, which identifies and schedules projects for the period, the HHS office "will consider whether there could be significant savings if drugs were distributed through a revised system." Nothing that "recently revised Medicaid regulations offer considerable flexibility to the states in providing drugs to their recipients" ("The Pink Sheet" Aug. 3, p. 3), the work plan reports that "the state Medicaid agency in Texas has been exploring various alternatives to the present system for procuring drugs, including the purchase of drugs through state contracts with drug manufacturers and rebates based on volume utilization." Due to the "problems inherent in developing a program-wide alternative distribution system," the Inspector General's Audit Office "will consider whether there could be significant savings if drugs were distributed through a revised system." Physician dispensing will also be examined by the Inspector General's Office of Analysis & Inspections, according to the work plan. "This inspection will explore the implications of physician drug dispensing on patient care and health care financing programs, such as Medicaid," the plan states. "The study will provide an in-depth analysis of issues," the plan continues. Questions the study will explore include: "(1) whether the practice reduces the selection of drugs available to the physician for patient treatment or increases the number of office visits when a patient requires a drug refill, and (2) what benefits it has provided (for example, reduced travel time in rural areas)." The plan also describes a number of investigations to be undertaken by the Inspector General's Investigations Office. Several involve reports of pharmacies charging brandname prices for supplying generic drugs. Another investigation concerns a report that Medicaid billings by "a number of" Washington, D.C. drug stores "far exceed norms based on location and customer volume." The office is also investigating 21 California physicians "who allegedly are prescribing drugs for patients who do not medically require them."

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