US Medicare paying more for drugs than VA

26 January 2001

If Medicare could have bought 24 popular prescription drugs at theprices that the US Department of Veterans' Affairs can negotiate, it would have saved $1.6 billion in 1999, and even if it had paid the drugs' actual wholesale prices, it would have saved $761 million, says a Department of Health and Human Services audit.

Medicare recipients pay 95% of the AWP of the drugs that it covers for the elderly, who are reimbursed by the system for 80% of the total. Medicare and its beneficiaries paid $3.9 billion for covered drugs in 1999, while the VA can negotiate directly with drug companies and suppliers for its bulk purchases.

DHSS deputy inspector George Grob told the Associated Press that the AWP which Medicare is required to pay is inflated by drugmakers and bears little resemblance to the actual price. If the new Administration and Congress are to deal with the problem of providing prescription drug coverage for the elderly, they will have to consider what price is to be paid for the drugs, because if they mimic Medicare they will pay too much.

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