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Hearing on Fraud and Abuse Issues in Pharmaceutical Pricing


Email Alert

February 13, 2007

On February 9, 2007, the House Committee on Oversight and Government Reform (Committee) held a hearing to examine fraud and abuse issues related to pharmaceutical pricing in the Medicare Part D program. In addition to Part D, the hearing addressed pricing in the Medicaid drug rebate program and the 340B drug pricing program. The hearing was called "Allegations of Waste, Fraud, and Abuse in Pharmaceutical Pricing: Financial Impacts on Federal Health Programs and the Federal Taxpayer."

The Committee heard testimony on a report by the United States Government Accountability Office (GAO) and from five individuals, including the Chief Counsel to the Inspector General of the Department of Health and Human Services (HHS). A brief description of each follows.

  • GAO Report: The GAO study resulted from congressional concerns regarding pricing information reported under federal programs and how this impacts federal spending. The Committee requested that the GAO examine federal agency oversight of prescription drug pricing practices involving the Part D program and the Medicaid drug rebate and 340B programs. The GAO advised the Committee that these programs have oversight inadequacies, inaccurate prices, a lack of price transparency, and the potential for abuse.

  • Lewis Morris, Chief Counsel to the Inspector General of the Department of Health and Human Services (OIG): Mr. Morris described three categories of fraudulent or abusive systems identified by the OIG and offered strategies to address each. The schemes included fraud in prescription drug pricing and marketing, and fraud in the delivery of dispensing prescription drugs.

  • Patrick J. O'Connell, Assistant Attorney General and Chief of the Civil Medicaid Fraud Section of the Texas Attorney General's Office: Mr. O'Connell testified about his state's experience with Medicaid fraud and identified a number of fraudulent schemes related to pharmaceutical pricing.

  • James W. Moorman, President and Chief Executive Officer, Taxpayers Against Fraud (TAF): Mr. Moorman testified about fraud by some drug manufacturers against Medicaid and announced that TAF will soon release a third report on recent False Claims Act cases concerning Medicaid fraud. In his testimony, Mr. Moorman criticized Justice Department efforts and suggested augmentation of the government staffing assigned to fraud cases.

  • Ronald J. Tenpas, Associate Deputy Attorney General, U.S. Department of Justice: Mr. Tenpas testified about the Justice Department's efforts to combat fraud by drug manufacturers and others in connection with the delivery of prescription drugs. Mr. Tenpas identified several areas of fraud and described a number of specific cases.

  • Gerard Anderson, Director of the Johns Hopkins Center for Hospital Finance and Management and Johns Hopkins University Professor: Professor Anderson testified about problems encountered when the federal and state governments purchase drugs. Professor Anderson found that the programs do not know the prices they pay for prescription drug and each pays a different price for each drug. As a proposed solution, Professor Anderson recommended that programs know the prices paid for each drug, the prices be compared, and Congress consider a consolidated approach to drug purchasing.

In conjunction with the Committee's activities concerning pharmaceutical pricing, Committee Chairman Henry A. Waxman has contacted the chief executive officers of 12 large insurers who offer Medicare Part D plans. In a February 9, 2007, letter, Chairman Waxman requested that the plans provide the Committee with a copy of certain documents that were required to be reported to HHS for contract years 2006 and 2007. The information requested included plan profits, plan administrative costs, and negotiated price concessions. The information is due to Chairman Waxman and the Committee by March 2, 2007. To view the data request letter, click here; to view the recipient list, click here.

To access the Committee testimony, click here.

We would like to thank Sarah A. Kaput (Mintz Levin Cohn Ferris Glovsky & Popeo PC, Washington, DC) for providing this email alert.

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