Statement of Congressman John D. Dingell, Ranking Member
Committee on Energy and Commerce

SUBCOMMITTEE ON HEALTH
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
JOINT HEARING ON "MEDICAID PRESCRIPTION DRUG REIMBURSEMENT: WHY THE
GOVERNMENT PAYS TOO MUCH"

December 7, 2004

Thank you, Mr. Chairman, for holding this hearing on the pricing of drugs for Medicaid beneficiaries. This Committee has been addressing the use of AWP, or "average wholesale price," as the basis of reimbursement for federal and state prescription drug programs for several years. As we will learn today, the drug reimbursement system for Medicaid is built on layers of artificial price structures, most of which do not reflect actual costs. It has also created an environment that puts providers in situations where they can charge higher drug prices to federal and state governments and also to private insurers.

There have been piecemeal efforts to address this flawed system and to reduce prices. There is a rebate program which recovers $7 billion a year of the $30 billion spent for Medicaid prescriptions. Since 2001, aggressive U.S. Attorneys and state attorneys general, with the assistance of whistleblowers such as the ones we will hear from today, have uncovered efforts to game the system and recovered over $1 billion in Medicare and Medicaid overcharges and fines. These lawsuits continue, with New York City and the State of Pennsylvania filing the most recent ones.

The States are taking their own steps to reduce drug prices. My own state of Michigan has been a leader in pooling its bargaining power with other states to get lower prices. I welcome Paul Rinehart, head of Michigan’s Medicaid program, to this hearing, and look forward to his testimony. And the Texas Vendor Drug program, which obtains actual drug acquisition prices from vendors, was recently recommended by an expert panel as one that the Centers for Medicare and Medicaid Services (CMS) should consider implementing nationwide. (I ask that this report by Abt Associates be placed into the record.) We look forward to learning more about this program from our witness from Texas.

But, these measures alone will not solve the health care problems for our poorest citizens. Nor will taking away health insurance from the poor to reduce the Medicaid rolls. Medicaid is an essential part of the nation’s health care system. In 2003, there were 40.4 million persons covered by Medicaid for their health needs, or 13.6 percent of our population. If this program did not exist, almost a third of our country’s total population would be uninsured. We need to be stepping up our assistance. Billions of dollars in tax cuts should not come at the expense of the health of our most vulnerable citizens.

We also need to look at what the Medicare Modernization Act (MMA) will do to the states and the elderly poor. Mr. Rinehart will tell us that Michigan may pay more under the MMA for drugs than it did before. And on Sunday, The New York Times ran a very disturbing article on the unworkability of the new Medicare drug plan for the 1.5 million Americans who live in nursing homes, many of them in different stages of dementia or receiving drugs through feeding tubes. These people are not on the Internet studying the various drug cards. It appears that CMS has no strategy for serving these people. I would suggest we address this critical issue early in the next Congress.

Again, I thank the Chairman for continuing to focus on Medicaid drug pricing issues, and I look forward to the testimony from all of our witnesses.

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(Contact: Jodi Seth, 202-225-3641)