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Executive Summary

MEDICAID BIDDING PRACTICES ARE SUBJECT OF GRAND JURY INQUIRY focusing on the brandname/PMA companies. A District of Columbia federal grand jury issued a subpoena to the Pharmaceutical Manufacturers Association on April 18 for information on state Medicaid bidding practices. The grand jury also has spread a wide net among the individual PMA members, contacting at least four major firms for information: Lederle, Lilly, Schering and Wyeth-Ayerst. The subpoena, originating from the Antitrust Division of the Department of Justice, asks for correspondences, reports, and internal or external communications relating to Medicaid bidding or rebate programs at the state level. The specific catalyst for the Justice antitrust investigation is not clear. However, a typical flare-up over one state's attempt to institute a bidding program occurred recently in Kansas. Using a closed formulary system, that state had asked drug manufacturers to place bids or offer rebates in order to be included under its Medicaid reimbursement program. PMA and member companies including Merrell Dow and Lederle were reportedly active in lobbying against the Kansas bid system in the state legislature. The opponents of the bid program secured a defeat for the plan in the state Senate in the form of the approval of an alternative open formulary. The lower chamber of the state legislature , however, subsequently rejected the open formulary. In response to the industry attempts to forestall the bid plan, one Kansas legislature subcommittee accused several firms of banding together and agreeing not to respond to the state's requests for bids.

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