Although the average annual use of clotting factor  VIII for a person with hemophilia A is 78,000 units, individual use varies  widely. Characteristics of Medicare Beneficiaries with Hemophilia

According to CDC estimates, 6 percent of the hemophilia population, or  about 1,100 individuals, are Medicare beneficiaries. Providers Obtain Clotting Factor Products for Substantially Less than Medicare’s Payment

HTCs and homecare companies are able to purchase clotting factor at  prices considerably lower than Medicare’s payment for clotting factor. Almost all HTCs that provide clotting factor participate in a federal  program that allows them to obtain prices from manufacturers that are 35  to 48 percent below AWP. Homecare companies can obtain prices that  range from 22 to 40 percent below AWP. Providers Incur Costs Associated with Delivering Clotting Factor to Medicare Beneficiaries That Are Not Separately Reimbursed

Providers incur costs associated with delivering clotting factor that are not  separately reimbursed by Medicare. Delivery costs are generated in inventory  management, storage, shipping, and the provision of ancillary supplies  necessary for the infusion of clotting factor. According to our analysis of data from four HTCs, the costs to HTCs for  dispensing clotting factor and providing ancillary supplies directly to  patients ranged from $0.03 to $0.08 per unit of clotting factor based on  data from 2000 and 2001. Conclusions

Medicare’s payment for clotting factor delivered on an outpatient basis is  flawed in the same way that its payment is flawed for other outpatient  prescription drugs. In tying its payment to AWP, Medicare has been paying  substantially more than providers’ actual acquisition costs. We also analyzed data from 11 hemophilia treatment  centers (HTC) and 2 homecare companies. These categories constituted over 90 percent of Medicare  expenditures on clotting factor in 2001. We did not  receive enough data from homecare companies to estimate their costs.
Why GAO Did This Study

In 2001, Medicare's outpatient expenditures for blood clotting factor used to treat the estimated 1,100 beneficiaries with hemophilia totaled about $105 million, or more than 2 percent of total Medicare spending on outpatient drugs. Earlier work by GAO indicated that Medicare's payment for certain outpatient drugs is substantially higher than providers' acquisition costs. Concerns have been raised about Medicare's payment for blood clotting factor. GAO was asked to compare provider costs of purchasing clotting factor with Medicare's payment for it and to identify costs to providers associated with delivering clotting factor.

What GAO Found

Medicare's payment for clotting factor, like other outpatient drugs, is 95 percent of the average wholesale price (AWP), a price established for each drug by its manufacturer. Medicare's payment is substantially more than the actual acquisition costs of hemophilia treatment centers (HTC) and homecare companies, which provide a majority of Medicare beneficiaries with clotting factor. Most HTCs obtain prices from manufacturers that are 35 to 48 percent below AWP by participating in a federal program that guarantees them low prices. Homecare companies obtain prices that range from 22 to 40 percent below AWP. Providers incur additional costs associated with delivering clotting factor that are not separately reimbursed by Medicare. GAO estimates that these additional costs in 2000 and 2001 ranged from $0.03 to $0.08 per unit sold by HTCs. (Hemophilia patients use an average of 78,000 units of clotting factor annually.) GAO did not receive enough data from homecare companies to estimate their costs. Delivery costs are generated in inventory management, specialized refrigerated storage, shipping, and the provision of ancillary supplies such as needles, syringes, and tourniquets to patients.