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Committee on Ways and Means For Immediate Release Lawmakers Explore Accuracy of Medicare Payments for Currently Covered Prescription Drugs Calculation of Average Wholesale Price Raises Questions WASHINGTON - This week, Chairman of the Heath Subcommittee Nancy Johnson (R-CT) will hold a Subcommittee hearing to discuss the flaws in how the average wholesale price (AWP) for prescription drugs is determined. The hearing will take place on Thursday, October 3, 2002 at 10:00 a.m. in 1100 Longworth House Office Building. Since law does not define it, questions have been raised as to how the AWP is determined. These numbers are reported by drug manufacturers and are not necessarily based on market transactions. The AWP is often inflated because it does not reflect any rebates, discounts, or “charge backs,” which are often offered by wholesalers. Medicare, which covers specific categories of outpatient prescription drugs, such as those for cancer treatment or dialysis, must pay 95 percent of what is determined to be the AWP. Some physicians have rationalized inflated AWP’s by saying that they are under-reimbursed for their costs in administering the drugs. Lawmakers will also explore these claims next week. “The AWP process is seriously flawed,” said Johnson. “It’s costing Medicare beneficiaries and taxpayers too much because Medicare is paying inflated prices. We must inject competition into the program to bring market forces to bear on reimbursement for drugs. The Administration says that they will fix the problem if Congress does not act, but it will take Congressional action to ensure that our seniors continue to have access to high-quality cancer care.”
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