WASHINGTON — The Medicare system and millions of its beneficiaries could save more than $1 billion a year on prescription drugs if Medicare used the same price schedule as the Veterans Affairs Department, according to a government investigation.
A study of 34 drugs showed that Medicare pays anywhere from 15% to a whopping 1,600% more than the VA for the identical compounds. The report recommended that Congress change the law to allow Medicare to use some of the VA methods, such as discounts for volume purchases.
"Drug industry charges to Medicare are a scandal," said Rep. Pete Stark (D-Hayward), who requested the investigation by the Health and Human Services Department's inspector general. A copy of the report was made available to The Times on Wednesday.
The findings could be of particular interest to the federal Medicare Commission, created by Congress to find ways to bring the program's costs under control, when it holds its next meeting Wednesday. Drug prices are among the fastest-growing components of health spending.
The $1.03 billion Medicare could have saved by using VA purchasing methods represented almost half of the $2.07 billion paid last year for the 34 drugs discussed in the report.
The VA, which runs a network of hospitals, buys directly from manufacturers or wholesalers and uses several methods to hold down costs, notably getting discounts for volume purchases.
Medicare, by contrast, simply reimburses doctors, hospitals or other suppliers for the pharmaceuticals used by beneficiaries. For many drugs, Medicare pays 95% of the average wholesale price as reported in industry publications.
There is no discount for volume purchases, although Medicare is a huge buyer. And individual doctors and hospitals can get discounts without making the savings available to Medicare.
Wednesday's report is the latest in a series of studies by the inspector general's office showing that "actual wholesale prices available to physicians and suppliers are often significantly lower than" the payments by Medicare, the IG's office noted.
Medicare does not cover pharmaceutical products for general use. Instead, it pays for use of drugs in special high-cost circumstances, such as chemotherapy and pain medications in cancer cases, and drugs used in connection with kidney dialysis and organ transplants. Medicare also pays for flu vaccines and hepatitis B vaccines.
