	Background

The Medicaid drug rebate program, the 340B drug pricing program, and  the Medicare Part D program help pay for or reduce the costs of  prescription drugs for eligible individuals and entities. The Medicaid Drug Rebate Program

Medicaid is the joint federal-state program that finances medical services  for certain low-income adults and children. CMS, an agency of the  Department of Health And Human Services (HHS), administers and  oversees the program. CMS provides additional guidance to manufacturers  regarding the calculation of these amounts. The state  Medicaid programs use the information to determine the amount of  rebates to which they are entitled from the manufacturers based on the  volume of drugs paid for by the programs. Oversight Inadequacies in the Medicaid Drug Rebate Program Raise Concerns about the Accuracy of Rebates Paid to States

We and others have reported inadequacies in CMS’s oversight of the price  information reported by manufacturers under the Medicaid drug rebate  program, including a lack of clarity in CMS’s guidance to the  manufacturers for calculating prices. This rule is intended to  provide more clarity to manufacturers in determining AMPs reported to  CMS, by indicating which sales, discounts, rebates, and price concessions  are to be included or excluded. Oversight Inadequacies and Lack of Transparency in the 340B Drug Pricing Program Raise Concerns about Overpayments to Drug Manufacturers

We and others have reported inadequacies in HRSA’s oversight of the 340B  drug pricing program, problems related to the lack of transparency in the  340B prices, and overpayments to drug manufacturers. In addition, we recently reported that HRSA did not  routinely compare 340B prices with prices paid by certain eligible entities. We also found that the  prices of the eligible entities using the rebate option reported to HRSA did  not reflect all rebates they later received from manufacturers, and thus we  could not determine whether these entities paid prices that were at or  below the ceiling established by the 340B prices. Because the 340B prices  are not disclosed to eligible entities, the entities cannot know how the  prices they pay compare with the 340B prices. HRSA has made changes to its oversight of the 340B drug pricing program  that are intended to address some of the concerns we and OIG raised in  our respective reports. Medicare Part D Shares Features with Other Federal Programs and Has Certain Features That Suggest Potential Oversight Challenges

The Medicare Part D program shares in common certain features with  other federal programs that help pay for or reduce the cost of prescription  drugs. Two other features of the Medicare Part D program suggest potential  oversight challenges. The second feature relates to the Part D program’s reliance on contracts  with private PDP sponsors. The PDP sponsors provide prescription drug  coverage to beneficiaries through a complex set of relationships and  transactions among insurers, PBMs, and drug manufacturers. These  relationships have similarities to the Federal Employees Health Benefits  Program (FEHBP), the health care program for federal employees, in  which the federal government contracts with private organizations to  provide drug benefits, and these organizations often contract with PBMs  to negotiate with manufacturers and provide other administrative and  clinical services. Thus,  concerns about prescription drug pricing inaccuracies in the Medicaid  drug rebate and 340B drug pricing programs and overpayments to drug  manufacturers highlight the importance of federal oversight of prices  reported by drug manufacturers under these programs. As the Committee develops its oversight agenda relating  to federal programs that help pay for or lower the costs of prescription  drugs, it may wish to consider the following areas. The extent to which federal agencies will take steps to systematically  ensure the accuracy of price data associated with federal programs,  specifically, the extent to which CMS will ensure that AMP and best prices reported  by manufacturers under the Medicaid drug rebate program include all  appropriate transactions and price concessions—particularly once the  proposed rule is finalized;  the extent to which HRSA will ensure the completeness and accuracy  of the 340B prices it maintains, obtain final prices paid by all covered  entities, and more systematically compare prices paid by entities with  the 340B prices; and  the measures CMS will take to ensure that the price information Part D  sponsors report to CMS include aggregate price concessions sponsors  negotiate with PBMs and drug manufacturers. The extent to which cognizant federal agencies will monitor for and detect  abuses in the reporting of drug price information that affects federal  programs.
Why GAO Did This Study

Several federal programs help pay for or reduce the costs of prescription drugs for eligible individuals and entities. Three examples are the Medicaid drug rebate program, part of the joint federal-state Medicaid program that finances medical services for certain low-income people; the 340B drug pricing program, which provides discounted drug prices to certain eligible entities such as community health centers; and the Medicare Part D program, which provides a Medicare drug benefit for the elderly and certain disabled people. The price information drug manufacturers report under these federal programs affects related federal spending. Spending is also affected by the extent to which federal oversight ensures the accuracy of this information. GAO was asked to provide information related to the oversight of prescription drug pricing practices that affect these federal programs. This testimony focuses on the oversight of drug pricing related to the three programs and the implications for future congressional oversight. This testimony is based on recent GAO reports examining these programs and related work by the Department of Health and Human Services Office of Inspector General and others.

What GAO Found

Regarding the Medicaid drug rebate program, GAO and others have reported inadequacies in the Centers for Medicare & Medicaid Services' (CMS) oversight of the prices manufacturers report to CMS to determine the statutorily required rebates owed to states. For example, GAO and others have reported a lack of clarity in CMS's guidance to manufacturers for calculating these prices. Several recent legal settlements under which manufacturers agreed to pay hundreds of millions of dollars to states because they were alleged to report inaccurate prices to CMS highlight the potential for abuse under the program. CMS recently issued a proposed rule intended to provide more clarity to manufacturers in determining the prices they report. GAO and others have reported inadequacies in the Health Resources and Services Administration's (HRSA) oversight of the 340B drug pricing program and problems related to the lack of transparency in the maximum prices, called 340B prices, charged to eligible entities. GAO reported that HRSA did not routinely compare the prices actually paid by certain eligible entities with the 340B prices and that many of these eligible entities paid prices higher than the 340B prices. Because these prices are not disclosed to the entities, the entities are unable to determine whether the prices they pay are at or below these prices. In addition, because 340B prices are based on information reported by drug manufacturers for the Medicaid drug rebate program, inaccuracies under that program affect these prices. HRSA has made changes to its oversight of the program intended to address some of these concerns. The Medicare Part D program shares in common with other federal programs certain features that led to federal agency oversight challenges. For example, Part D relies on multiple private organizations to report to CMS certain price concessions from manufacturers, similar to the Medicaid drug rebate program. Also, Part D relies on CMS's oversight to ensure that price information reported to it by private organizations are accurate, similar to the Medicaid drug rebate and 340B drug pricing programs. Other features of Part D, such as its reliance on contracts with private insurers to provide drug coverage to beneficiaries through a complex set of relationships and transactions with private entities, also suggest potential oversight challenges. Oversight inadequacies, inaccurate prices, lack of price transparency, and the potential for abuse suggest areas the Committee may wish to consider as it develops its oversight agenda. The Committee may wish to consider the extent to which CMS and HRSA will systematically take steps to ensure the accuracy of prices reported and charged by private organizations that participate in federal programs. The Committee may also wish to consider the extent to which federal agencies will effectively monitor for and detect abuses in the reporting of drug price information that affect these three federal programs.