
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: MONDAY, February 18, 1991                   TAG: 9102180049
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A1   EDITION: METRO 
SOURCE: The New York Times
DATELINE: WASHINGTON                                LENGTH: Medium

MEDICAID LAW LEADS TO DRUG PRICE INCREASE

Congress recently passed a law requiring drug companies to give Medicaid the same deep discounts they give other big customers. But instead of reducing Medicaid drug prices, many companies are now raising the prices those other big customers must pay.

For two decades, Medicaid, the federal-state health program for poor people, has paid more for prescription drugs than other large purchasers, such as government and private health groups, which have negotiated discounts of 25 percent to 60 percent or more off the usual wholesale prices.

Until last year, the government did not demand such discounts because federal Medicare officials did not focus much on the cost of drugs and drug companies argued that their prices were justified by the high costs of making the drugs.

Under the law, which was passed despite objections from the drug industry and took effect on Jan. 1, drug makers must offer state Medicaid programs the lowest price available to any purchaser in the market.

Now drug companies are increasing prices to some of those other purchasers, including the Department of Veterans Affairs, prepaid health plans such as the giant Kaiser Permanente group, hospitals, family-planning clinics and community health centers for migrant workers, homeless people and the indigent.

Health-care experts say these added costs may soon trickle down to consumers in the form of higher medical costs, and ultimately, insurance premiums.

In October, the Congressional Budget Office estimated that the Medicaid discounts would save $1.9 billion for the federal government and $1.4 billion for the states over five years.

by CNB