Home Health & Hospice Week

The trouble with bluffs is they wear off eventually.

The Centers for Medicare & Medicaid Services has been threatening since last year to tackle Medicare drug prices administratively if Congress doesn't address the issue. But Congress has taken a pass on reforming the average wholesale price methodology, and still CMS hasn't acted.

Now CMS is once again threatening to take action on its own, but it's less clear than ever what the agency plans to do. The agency isn't saying when it'll act. "We have said publicly if Congress doesn't fix the AWP-based payment system legislatively, CMS will act administratively," a CMS official says. "We do not have a timetable," the official adds, "but we are looking at that issue very closely."

CMS Administrator Tom Scully has ruled out using inherent reasonableness, short of a catastrophic need. Indeed, the CMS official says the agency is looking for an alternative approach to IR, but won't go into details. The new approach probably will involve finding an alternative to the Red Book that currently forms the basis of drug prices.

Meanwhile, the House Ways and Means Health Subcommittee still wants to come to grips with the AWP honor system. As with other Medicare issues, drug payments are being wrapped up in President Bush's Medicare reform package, which the subcommittee has yet to take up.

The AWP issue remains on the states' radar screen as well, and the pressure of state lawsuits may yet force drugmakers to start reporting lower costs to the Red Book, which would lower both Medicare and Medicaid payments.

Connecticut Attorney General Richard Blumenthal said he plans to sue seven drug makers for playing games with AWP. Blumenthal maintains that the companies' artificial inflation of the AWP forced the state to pay far too much for their products under Medicaid.

The AG says providers are offered the drugs at rates far less than the AWP - which means they can pocket the sometimes-huge difference between what they pay for the drug and what they can collect from Medicaid.

The AG is seeking to recover more than $15 million in Medicaid overcharges, along with civil penalties. In addition, he's going after an as-yet undisclosed amount on behalf of Connecticut residents who paid higher copays than they should have.