Medicare overpaid for prescription drugs with new generic versions because of delay in incorporating new prices into payment calculations

Aug 29 2008

Medicare overpaid for irinotecan, a cancer drug sold by Pfizer under the name Campostar, by $6.5 million in March because of a delay in updating its pricing formula, according to a report released on Tuesday by the HHS Office of Inspector General, Bloomberg/Los Angeles Times reports.

A generic version of the drug was approved for sale on Feb. 20. However, a two-month delay in integrating the new generic prices into the agency's payment system resulted in the additional expense (Bloomberg/Los Angeles Times, 8/28). According to the report, Medicare was paying $126 per dose of irinotecan in March despite average generic prices of $41 for the drug. When sales of the branded version were factored in, the drug's average price in March was $52.

The report found that Medicare likely is overpaying for other drugs because of the delay in updating its pricing formula, according to the Wall Street Journal's "Health Blog." The report suggests that Medicare devise a way to "address pricing discrepancies arising from newly available generic drugs," including asking for changes in laws governing Medicare drug payments (Goldstein, "Health Blog," Wall Street Journal, 8/27).

The report is available online (.pdf).