[e-drug] Bayer to cut Medicaid drug prices and pays USD 14m

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E-drug: Bayer to cut Medicaid drug prices and pays USD 14m
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BAYER TO CUT MEDICAID DRUG PRICES
GIANT MUST PAY STATES $14 MILLION

One of the world's largest drug companies said Monday that it
would reduce prices on some products paid for by the government
in the wake of a trailblazing Medicaid fraud settlement finalized
between the drugmaker and state and federal regulators. Bayer
Corp., a U.S. subsidiary of Bayer AG of Germany, would be the
second major drug company to cut prices this year amid allegations
that U.S. drug companies lied to the government about the
wholesale prices of certain pharmaceuticals. The settlement, signed
by Bayer last week, divides a $14 million payment by Bayer among
45 states, including $114,000 to the Illinois Medicaid program. In
addition, it finalizes a five-year agreement under which the
drugmaker is obligated to make thorough disclosures of the prices it
sets and upon which the government bases it reimbursements.
More broadly, the settlement with Bayer is expected to serve as a
model for similar arrangements for up to 20 drugmakers--including
five in the Chicago area--that are still under investigation in the
4-year-old state and federal pricing fraud inquiry.

The Medicaid investigation is one of several pharmaceutical pricing
inquiries undertaken since the early 1990s as regulators and
policymakers grappled with a central flaw in the way key
government programs pay for drugs. Such programs allow
drugmakers to set the price higher than what many private-sector
customers would pay. Estimates of overpayments run in excess of
$1 billion annually and may be especially troubling because of
increasing political pressure on Congress to greatly expand drug
coverage by Medicare, the federal insurer for nearly 40 million
elderly and disabled people. The Bayer settlement was announced
in September but did not take effect until 22 states with the most
at stake approved the deal. The last two of the states, Illinois and
California, signed off on the agreement late last month.
It is not clear how much Bayer will drop its prices and on how many
drugs. Also unknown is how much those cuts will save taxpayers.
Medicaid officials should see the new Bayer price list by the end of
the month. The savings are expected to be significant.

In its settlement, Bayer did not admit wrongdoing, but agreed to the
financial settlement and a more accurate reporting of prices. "I
would anticipate that [Medicaid prices] would ultimately be
cheaper," said Bayer spokesman Robert Kloppenburg. "The pricing
is just being implemented now." In the financial portion of the
agreement, the biggest chunks of money, $2.8 million and $2.7
million, respectively, will go to Florida and New York, which operate
two of the largest Medicaid programs in the country. The
settlement with Bayer grew out of a federal suit filed by a
whistleblower in Florida in the mid-1990s that was eventually joined
by the U.S. Department of Human Services' Office of Inspector
General, the Justice Department and a coalition of state Medicaid
Fraud Control Units. Bayer already has lowered prices for five drugs
identified by investigators as having inflated prices. Those
reductions are hefty: a 28 percent drop in charges for Kogenate, (a
blood clotting agent) and an 86 percent cut in the cost of saline
solution, which dropped from $11.14 to $1.53 per package,
according to investigators.

The five Bayer drugs were on a list of 51 drugs made by more than
20 manufacturers for which investigators documented "a pattern of
misrepresentation" that resulted in Medicaid overpaying for the
products. Beginning in mid-2000, drugmakers agreed to provide
new, substantially lower prices for those 51 drugs. Despite the
lower prices on the 51 drugs, however, not all states have cut
reimbursements to providers. The State of Kentucky Medicaid
program, for instance, is paying what investigators regard as
inflated prices for the 51 drugs spotlighted in their probe. A
Kentucky Medicaid spokesman said the agency received pressure
from providers and was worried that they would stop carrying the
drugs in rural areas of the state. Government investigators have
argued that drugs were never intended to be a source of profit for
pharmacists or doctors at Medicaid's expense. Profit is supposed to
come from service charges like dispensing or injection fees.

Excerpts from an article by Andrew Zajac and Bruce Japsen,
Chicago Tribune Staff Reporters Published August 14, 2001

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