Medicare Compliance & Reimbursement

The first multistate Medicaid drug purchasing pool, announced Feb. 20 by Michigan and Vermont, is getting bigger. South Carolina and Wisconsin have joined the compact, which seeks to use bulk purchasing power to achieve savings beyond the legally mandated Medicaid drug rebate. Other states such as Minnesota have also expressed interest. Virginia-based pharmacy benefit manager First Health Services Corp. will operate the program.

States have previously pooled their drug purchasing for groups such as state employees. In January, ten states announced plans for a pool to purchase drugs for both Medicaid and non-Medicaid consumers, a linkage the drug industry opposes on both policy and legal grounds.

In opposing the drug pools, the industry argues that, under federal law, Medicaid programs already receive a rebate of at least 15 percent off a manufacturer’s best price. However, whether drugmakers are really reporting their best prices has been called into question. A New Orleans whistleblower lawsuit alleges that Merck & Co. sold the heartburn drug Pepcid to hospitals for 10 cents while charging Medicare $1.65. According to the Wall Street Journal, in a practice that appears to be common, Merck characterized the 10 cents as a “nominal” price exempt from Medicaid best-price requirements, even though most agree that Congress intended “nominal” to refer to only the very low prices that might be offered to charities and nonprofit clinics.