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Dr. Bob is Robert Hsiung, MD,
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Posted by Phil on February 19, 2003, at 0:53:35
On Drugs, Spitzer Steps in Where Feds Fail to Tread
February 18, 2003
The decision by New York Attorney General Eliot Spitzer to take on the drug industry over a questionable pricing practice that drives up the cost of medicines is an example of his enthusiasm for battles that Washington has been slow to wage.Spitzer's weapon of choice - a lawsuit against two drug companies - isn't the cleanest way to force an industry to change its ways. Washington should develop a better method for setting the prices it pays for prescription drugs bought through Medicare and Medicaid. But Spitzer's lawsuit will perform a valuable public service if it nudges officials toward that reform, which could save taxpayers hundreds of millions of dollars.
According to the suit filed last week against GlaxoSmithKline and Pharmacia, drug companies set an average wholesale price for their products. Medicaid pays 90 percent of that price; Medicare 95 percent. But drug companies routinely charge doctors and pharmacies less than that government-set price and allows them to pocket the difference, or spread, as an inducement to push the products. For instance, according to Spitzer, the government pays 76 percent more than doctors are charged for Doxorubicin, a drug used to treat cancer.
In an abuse that is industry-wide, drug companies intentionally inflate average wholesale prices, Spitzer said in his suit charging the two companies with consumer fraud, commercial bribery and making false statements to government health plans. It is illegal in New York to interfere with the fiduciary relationship between doctors and patients, which Spitzer says is one corrosive effect of the pricing scheme.
GlaxoSmithKline says that companies are not responsible for government decisions to reimburse doctors and pharmacies more for drugs than they paid for them. The company may have a point. The courts will have to decide whether laws have been broken.
But it's Washington's job to look out for taxpayers. If Medicare and Medicaid are paying more for drugs than they should actually cost, government officials should put a stop to it.
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