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WASHINGTON (AP) – Medicaid pays up to one-third more than other federal programs for expensive AIDS drugs, with states failing to negotiate better deals with drug companies, a federal audit concludes.

The report by the Health and Human Services Inspector General also blames federal officials for failing to give states information they need to negotiate better prices and for hamstringing their power to deal.

Medicaid, a federal-state health insurance program for poor and disabled Americans, pays prescription drug costs for about 45 percent of the 335,000 Americans with AIDS who receive regular care.

In 1999, the program spent $617 million on 16 AIDS drugs. That’s 33 percent more than the maximum price paid by the Veterans’ Administration, the Department of Defense, the Public Health Service and the Coast Guard, the inspector general said in the report.

On average, Medicaid pays 61 cents more per pill, or $66 more pre prescription, than these four agencies.

The report examined 10 states with the largest AIDS populations and estimated the national numbers based on those figures. The inspector general cautioned that the conclusions apply only to AIDS drugs, although it’s likely that states are overpaying for other drugs, as well.

Similar problems plague Medicare, which pays significantly more than other agencies for the drugs it covers during hospital stays. That’s because federal law ties Medicare prices to the inflated “average wholesale price,” which is set by manufacturers and is significantly higher than the actual price paid by large buyers in the private sector, who negotiate significant discounts.

States can set their own prices for Medicaid drugs, but most states base prices on the inflated average wholesale price, the inspector general said.

Some states are paying more than others. Massachusetts pays 24 percent more than the maximum price set for the VA and Defense Department. Maryland pays 33 percent more. Georgia tops the list, paying 55 percent more. The only explanation for the difference is state policy, the report said.

If the nine other states examined all paid Massachusetts’ prices, they would have saved $24.5 million per year.

Part of the problem is that federal law requires states to cover all AIDS drugs if they cover any of them, meaning states can’t threaten to drop a particular drug from the approved list during price negotiations.

Another problem the report cited: States don’t have much information about how much drugs actually cost, making negotiations difficult.

“States are often working blind,” said Matt Salo, a Medicaid expert at the National Governors’ Association.

The inspector general recommended that the Center for Medicare and Medicaid Services, the branch of HHS that oversees Medicaid, give states better information about what other states are paying and about the actual cost of the medicines.

It also recommended that HHS refuse to approve state Medicaid plans that do not negotiate better prices.

Copyright © 2001, Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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