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GAO WILL MISS MAY 1 HMO, HOSPITAL DRUG PRICES REPORTING DEADLINE

Executive Summary

GAO WILL MISS MAY 1 HMO, HOSPITAL DRUG PRICES REPORTING DEADLINE because it has been unable to obtain health maintenance organization and hospital data on post-Medicaid rebate price changes, GAO Health Care Financing and Policy Issues Director Janet Shikles advises in a Feb. 26 letter to Congress. The law establishing the Medicaid drug price rebate program directs GAO to assess annually whether the program is leading to price changes for other purchasers, including HMOs and hospitals. Shikles attributed the delay to two factors. Some HMOs "initially declined" to provide price data due to confidentiality provisions in contracts with manufacturers and, in an "unexpected difficulty," some HMOs and hospital buying groups were hampered in providing data because not all of it is computerized, she explained. Shikles said GAO is "optimistic" that it can work out these issues with the providers but "it is unclear how long it will take before we have sufficient drug price data to analyze." The letter was sent to Senate Finance Committee Chairman Bentsen (D-Tex.), House Energy & Commerce Committee Chairman Dingell (D-Mich.), Senate Aging Committee Chairman Pryor (D-Ark.) and House Aging Committee Chairman Roybal (D-Calif.). Private purchasers are facing a dilemma in that they have complained to Congress about an erosion in past drug discounts following enactment of the Medicaid rebates but have not provided detailed information to document those price changes. A group of HMO and hospital-related organizations, the Coalition of Health Care Providers Concerned about Rising Drug Costs, issued a position paper Feb. 19 urging that the Medicaid program be switched to a fixed-percentage rebate rather than using "best prices" ("The Pink Sheet" Feb. 24, p. 5). The group said drug prices have increased since the Medicaid program's enactment at twice the rate that would have been expected given previous inflation trends but contract confidentiality provisions prevented members from disclosing more specific information. The group's case with Congress could be hurt by this lack of data, particularly since GAO and other congressional research organizations frequently have access to trade secret data in their studies. At a Feb. 25 conference sponsored by a member of the coalition, the Group Health Association of America, Senate Aging Committee staffer John Coster said that Congress had extended an agreement of confidentiality to all hospitals and managed care organizations willing to provide cost data to GAO though the promise has produced little response. "It's important for your group to cooperate in giving us the data that we need," he urged the HMO trade group. Commenting on the coalition's recommendation for a flat percentage Medicaid rebate, Coster maintained that this approach would only "swing the seesaw" back to Medicaid and increase the program's prices. He said that if the program is modified, Sen. Pryor is interested instead in allowing all federal purchasers to pool their interests and negotiate a single rate with pharmaceutical companies, and in assisting HMOs and hospitals by no longer requiring private purchasers' "best prices" to be used in Medicaid rebate calculations. A similar concept is being explored in legislation already being drafted on the House side by Rep. Wyden (D-Ore.) ("The Pink Sheet" Oct. 21, 1991, p. 3). A new player on the Medicaid issue is Rep. Slattery, a Kansas Democrat who is concerned about how the Medicaid program is affecting the Department of Veterans Affairs. Slattery sent a letter to V-A Deputy Secretary Anthony Principi on Feb. 24 requesting "complete information regarding V-A drug purchases." For "each major drug" purchased by V-A, Slattery is seeking the manufacturer's name; the price before enactment of the Medicaid rebates; the "peak price" to V-A after enactment; whether the manufacturer has agreed to any rollback in prices and any "extenuating circumstances that might affect the price for the drug." The information requested by Slattery appears to be similar to that currently being compiled by the V-A for its upcoming report on drug price changes ("The Pink Sheet" Nov. 11, 1991, T&G-7). Slattery is a member of both the House Commerce Committee, which has jurisdiction over Medicaid, and the House V-A Committee.
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