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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsA markup of 279,000% over production costs
AHF to Ask States to Block Gileads $1,000 per Pill Hepatitis Drug From Medicaid Formularies
Gilead is not the original developer of Sovaldi, its new Hepatitis C medication that will cost $84,000 for a 12-week course of treatment; instead, it bought the drug developer, rival company Pharmasett, for $11 billion cash in 2011. Gilead now seeks a bonanza on a financial investment by gouging cash-strapped government programs, treating states like Gileads own privateriggedstock market.At $1,000 per pill, Sovaldi price is 1,100% more than Gileads AIDS drug combination Stribild ($80 per pill); pharmacy industry sources say Solvaldis price suggests a retail markup of 279,000% over production costs.
WASHINGTON, Jan 29, 2014 (BUSINESS WIRE) -- In a series of letters to be sent to state Medicaid directors starting today, AIDS Healthcare Foundation (AHF) President Michael Weinstein will ask the state directors to block Gilead Sciences new $1,000-per-pill Hepatitis C drug Sovaldi (sofosbuvir) from inclusion on their respective state Medicaid and other drug formularies. The drug was approved by the F.D.A. on December 6, 2013 and Gilead immediately announced that it would price the drug at $84,000 for a twelve-week course of treatmentor $1,000 per tabletmaking it one of the most expensive drugs ever marketed. Suggested treatment guidelines also require that Sovaldi be used with another drug, ribavirin (a nucleoside inhibitor), further adding to the cost of the prohibitively expensive course of treatment.
When is enough, enough? At $1,000-per-pill, Sovaldi is priced 1,100% more than Gileads most expensive AIDS drug, Stribild, its four-in-one AIDS drug combination, which was priced at $80 per pill a year ago when it came to market, said Michael Weinstein , President of AIDS Healthcare Foundation. At that time, Stribilds price was 35% more than Atripla, the companys best selling combination HIV/AIDS treatment, and made Stribild the highest priced first-line combination AIDS therapy. Now, Gilead has set a new benchmark for unbridled greed with its outrageous price for Sovaldia price that some pharmacy industry sources suggest represents a retail markup of 279,000% over the cost of actually producing the drug.
more
http://www.marketwatch.com/story/ahf-to-ask-states-to-block-gileads-1000-per-pill-hepatitis-drug-from-medicaid-formularies-2014-01-29
KoKo
(84,711 posts)trying to get away with this.
siligut
(12,272 posts)The first value is salary, bonuses, etc. The second is income from exercising stock options
Chairman and Chief Exec. Officer 4.88M 77.12M
Dr. John F. Milligan Ph.D., 53
Pres and Chief Operating Officer 2.38M 13.60M
Ms. Robin L. Washington , 51
Chief Financial Officer, Principal Accounting Officer and Exec. VP 1.43M 2.92M
Dr. Norbert W. Bischofberger Ph.D., 58
Chief Scientific Officer and Exec. VP of R&D 1.80M 0.00
Mr. Kevin B. Young CBE, 56
Exec. VP of Commercial Operations 1.67M 22.06M
Amounts are as of Dec 31, 2012 and compensation values are for the last fiscal year ending on that date. Pay is salary, bonuses, etc. Exercised is the value of options exercised during the fiscal year.
Currency in USD.
http://finance.yahoo.com/q/pr?s=GILD+Profile
mike_c
(36,281 posts)Remarkable greed.
siligut
(12,272 posts)So far clinical testing has been in Korea, but clinical testing in the US will start this year. I am thinking Gilead wants to get their money out of their $11 billion purchase of Pharmasset before the vaccines are approved.
Yes, Big Pharma executive salaries are obscene. Some people like to say the high cost of medicine is an attempt to recoup the costs of R&D, but one look at CEO compensation and we know that certainly isn't the whole story.
Nictuku
(3,617 posts)... and there are ways to defer taxes on stock dividends (I think forever under current tax code)
siligut
(12,272 posts)And the price per share has risen 228% in the past 2 yrs with a 2 for 1 split in January of last year.
El_Johns
(1,805 posts)siligut
(12,272 posts)As opposed to retail investors.
El_Johns
(1,805 posts)siligut
(12,272 posts)Yahoo Finance is easy to use and well organized.
http://finance.yahoo.com/q/mh?s=GILD+Major+Holders
El_Johns
(1,805 posts)Last edited Fri Jan 31, 2014, 04:13 PM - Edit history (1)
by the Johnson family:
"The founding Johnson family controls Fidelity; Abigail Johnson, CEO Ned Johnson's daughter and one of America's wealthiest women, is its largest single shareholder."
http://biz.yahoo.com/ic/40/40150.html
FMR LLC (Fidelity Management and Research) or Fidelity Investments is an American multinational financial services corporation. It is one of the largest mutual fund and financial services groups in the world. Founded in 1946, the company has since served North American investors
Fidelity is a privately held company founded by Edward C. Johnson II in 1946, which is owned by employees and the Johnson family. Fidelity Management & Research Company, the US investment management division of Fidelity Investments, acts as the investment adviser to Fidelity's family of mutual funds...
The founding Johnson family, individually and through various trusts, owns stock representing a 49% voting interest in FMR, and have signed agreements pledging to vote all their shares as a bloc. Edward "Ned" C. Johnson 3rd is chairman of the group. His daughter, Abigail Johnson, was once the largest single shareholder with about 25%, but in October 2005, it was reported that she had sold a "significant" portion of her shares to family trusts, and that there are doubts as to whether she is still in line to succeed her father.[5] Most of the remaining 51% voting interest is held by various Fidelity employees. Fidelity is presumed under the Investment Company Act of 1940 to be controlled by the Johnson family.[6]
http://en.wikipedia.org/wiki/Fidelity_Investments
And Edward Crosby Johnson is from a Boston Brahmin family.
Edward C. Johnson 2d
Edward C. Johnson 2d "began his long association with the world of finance in 1935 when, as a practicing lawyer with the firm of Ropes, Gray, Boyden & Perkins (now Ropes & Gray), he began handling the legal affairs of Incorporated Investors, then one of Boston's largest investment companies. Four years later, he quit law and joined the investment firm as treasurer. In 1943, he became president and director of Fidelity Fund, a small ($3 million) Boston outfit." This became FMR Corporation, the financial services holding company that includes the Fidelity group. His son, Edward C. Johnson 3d, succeeded him as its head. "A Boston Brahmin, Mr. Johnson was born Edward Crosby Johnson 2d in a townhouse on Beacon street, Back Bay, on Jan. 19, 1898, the son of Samuel Johnson, a partner in a leading dry-goods firm [C.F. Hovey & Company], and Josephine (Forbush) Johnson. His ancestors came to this country in 1635 and were among the early settlers of Essex County. He was a graduate of Milton Academy, Harvard College, class of 1920, and Harvard Law School in 1924. During World War I, he served overseas with the Navy as an electrician's mate. Between college and law school he studied for a year at Harvard Business School. Following law school, he joined Ropes, Gray." (Edward Johnson 2d, Retired Board Chairman at Fidelity. Boston Globe, Apr. 4, 1984.) Edward Crosby Johnson 2d's father, Samuel Johnson, was the son of Dr. Amos Howe Johnson. Edward C. Johnson 2d married Elsie Livingston Johnson, whose father, Reginald Mansfield Johnson, was the son of Rev. Francis Howe Johnson. (Samuel Johnson. New York Times, Aug. 28, 1932; Miss Julia Edwards Weds R.M. Johnson. New York Times, Jul. 3, 1902; R.K. West's Master List.)
R.K. West's Master List / Rootsweb
The Johnsons' grandfathers, Dr. Amos and Rev. Francis Johnson, were brothers, whose sister, Mary Ann, married Prof. Austin Phelps of Andover Theological Seminary. Edward Johnson Phelps, Skull & Bones 1886, was their son. He was secretary, treasurer, and general manager of the Northern Trust Safe Deposit Company of Chicago from 1895 to 1929, president and a director from 1923 to 1929. He represented the Yale Club of Chicago on the Alumni Board from 1910 to 1916, and was a member of the Board of Education of New Trier Township High School from 1918-1923. (Genealogical and Personal Memoirs Relating to the Families of the State of Massachusetts. By William Richard Cutter, William Frederick Adams. Lewis Historical Publishing Company, 1910; Bulletin of Yale University. Obituary Record of Graduates of Yale University Deceased during the Year 1938-1939, pp. 53-54.)
http://www.smokershistory.com/Perkins.html
I also find that Edward Crosby Johnson II (Abigail's father) married his second cousin, which presumably kept the family money in the family.
eepatt
(21 posts)It does take money to do the research and testing needed to bring a new drug to market, and that is usually the excuse big pharma gives for charging outrageous prices. It would be interesting to see how much is spent on R & D compared the the advertising budget for the different prescription drugs. The difference between big pharmaceutical corporations and illegal drug pushers? Illegal drug pushers must have ethics. (We might not like their ethics, but at least they have some!)
arikara
(5,562 posts)Is market research. They rarely bring out something new, all they do now is change a molecule in something already on the market so they can patent it again.
And as for testing, they go to slums in third world countries and pay a few people who don't even necessarily have the condition a pittance to take the pill then call it a test. And worse yet, our crooked governments accept it. I guess because the panels are stacked with ex pharma folk.
They are filthy greedy crooks. IMHO.
TransitJohn
(6,932 posts)Fact.
AllyCat
(16,218 posts)I cannot imagine what they are paying. Add in salaries for ayear of "work" the rest of us won't see in a lifetime of labor and the R/D excuse has a lot less bite.
El_Johns
(1,805 posts)Big Pharma might be working a lot harder to sell you products than to develop new ones.
Prescription drug companies aren't putting a lot of resources toward new, groundbreaking medication, according to a recent report in BMJ, a medical journal based in London. Instead, it's more profitable for them to simply to create a bunch of products that are only slightly different from drugs already on the market, the reports authors said.
"Pharmaceutical research and development turns out mostly minor variations on existing drugs," the authors write. "Sales from these drugs generate steady profits throughout the ups and downs of blockbusters coming off patents."
The authors go on to say that for every dollar pharmaceutical companies spend on "basic research," $19 goes toward promotion and marketing.
The BMJ study isn't the first time pharmaceutical companies have been accused of putting their own profits ahead of the health of their customers. Lexchin, a professor at York University's School of Health Policy and Management, was the co-author of another study in 2008 that argued that pharmaceutical companies spend almost twice as much on promotion as they do on research and development.
http://www.huffingtonpost.com/2012/08/09/pharmaceutical-companies-marketing_n_1760380.html
Government does most of the basic R&D for pharma.
Industry R&D risks and costs are often significantly reduced by taxpayer-funded research, which has helped launch the most medically important drugs in recent years and many of the best-selling drugs, including all of the top five sellers in one recent year surveyed (1995).
An internal National Institutes of Health (NIH) document, obtained by Public Citizen through the Freedom of Information Act, shows how crucial taxpayer-funded research is to top-selling drugs. According to the NIH, taxpayer-funded scientists conducted 55 percent of the research projects that led to the discovery and development of the top five selling drugs in 1995. (See Section III)
https://www.citizen.org/publications/release.cfm?ID=7065
proudretiredvet
(312 posts)It will never make it right but the cost of production is not the only cost they have to recover. Research, development, and FDA testing costs are also out there and they will need to recover them as well. This does not justify the cost that they are trying to charge.
El_Johns
(1,805 posts)Industry R&D risks and costs are often significantly reduced by taxpayer-funded research, which has helped launch the most medically important drugs in recent years and many of the best-selling drugs, including all of the top five sellers in one recent year surveyed (1995).
An internal National Institutes of Health (NIH) document, obtained by Public Citizen through the Freedom of Information Act, shows how crucial taxpayer-funded research is to top-selling drugs. According to the NIH, taxpayer-funded scientists conducted 55 percent of the research projects that led to the discovery and development of the top five selling drugs in 1995. (See Section III)
https://www.citizen.org/publications/release.cfm?ID=7065
proudretiredvet
(312 posts)I have some experience in this industry. If you have a product that is not going to be sold by one of the big pharm companies good luck finding research money and or marketing money.
Your statement of the top five selling drugs rang a big bell for me. If the drugs were not aimed at a big market then they didn't make it into the realm of government funding for research. There have been some remarkable drugs and substances that were awarded patients and made it through animal testing, with great results, and then failed to go forward due to the fact that big pharm did not own them and would not realize any of the profits.
Big pharm is the worst of the big business entities when it comes to monopolizing profits.
SammyWinstonJack
(44,130 posts)spanone
(135,870 posts)frwrfpos
(517 posts)Recommending this
johnnyreb
(915 posts)Put them in the stockades and offer them Freedom for a price.
another_liberal
(8,821 posts)I mean seriously, what do these monsters have to do?
whatthehey
(3,660 posts)This is a not rare but not usual case in pharma where we can easily cut through the claims of R&D spending. Here that was subsumed completely into an $11B buy in.
So the company is $11B in the hole before they sell pill 1.
It goes for $84,000 per treatment and costs pretty much $25 to make if that % is true.
That makes breakeven assuming zero SGA (impossible) at 130,991 treatments. They only start to contribute to overhead at the 130,992nd full price treatment.
Now we can't cut through SGA obfuscation so we can maybe take an average. The company's overall gross margin is 75% and net margin is 28% so this means they have 47% overhead/revenue.
So far so bad for Gilead. But there is good (for them) to come. 3.2million people in the US deal with Hep C. Uptake of treatment data is hard to find in the US but in Canada is about 24-25%. That's probably higher than the US as their coverage is better but let's use it. That means about 800,000 people will seek treatment in the US.
Obviously I have no clue based on comparable efficacy what their proposed share is, as I'm neither an MD or a pharma marketing guy, but let's pick 50% penetration and they would have a $33.6B business (400,000 treatments). Manufacturing would cost them just $10MM but SGA would cost that 47% or $15.8B. They would make then $17.8B but need to pay back $11B in investment for net profit of $6.8B - about 20% return if they get 50% of the market.
Of course if they can lower SGA ratio (probably can as a new drug doesn't add an entire new set of overhead. There's more salespeople and marketing and Finance brand folks and whatnot but still only one CEO, one HQ office etc) and keep the prices going after competition comes in (probably can't for long) then year over year it will get better, but still, while it's great cake and nice profit, it's not 279000%. It's important not to assume price-direct costs is profit, especially in the massively overherhead-laden pharma industry and with an 11 figure upfront ante to pay off.
And while executive salaries are certainly obscene and undeserved, we need perspective there too. Even if we assume every penny of the above is checks written by Gilead (not true of course - stock options are only a fraction of value received) the total would be about 1.2% of Gilead's revenue and 5% of its overhead costs.
kristopher
(29,798 posts)The stock was already up 240% in anticipation of this drug and Gilead jumped in with an offer almost double that. This absurd pricing is the result.
If there is any justice the government cap will work to push Gilead into bankruptcy and the assets will be picked up and marketed at a reasonable price relative to the costs of development.
Welcome to DU.
Stuart G
(38,439 posts)It won't. Every TV station in the world should have this on. Unrestrained Greed.....
When you think you have seen it all.........there is more...
JackHughes
(166 posts)India does not recognize pharmaceutical patents -- and good for them!
As a result, prescriptions costing hundreds or thousands of dollars a month in the US can be bought via mail order for just just a tiny fraction of the extortion-level prices charged even for their American (or Canadian) counterparts. The quality is just as good.
This is the most closely guarded secret in American health care. It's shocking that American doctors do not pass this information along to their cash-strapped patients.
NobodyHere
(2,810 posts)They just copy or reverse-engineer what others have done.
wildbilln864
(13,382 posts)Brainstormy
(2,381 posts)but if we only knew, the vast majority of drugs probably have this kind of obscene markup. How long ago do you think Big Pharma recovered the R&D on the birth control pill, for example. But it's way more expensive than it was 35 years ago.
sulphurdunn
(6,891 posts)are mass murderers. Using price to deny life saving drugs is no different that standing people against a wall and shooting them, except that there's no current profit incentive to do that or they'd find some way to do it now.
Spitfire of ATJ
(32,723 posts)tavernier
(12,398 posts)and two of the prescribed eye drops were $150 each. I asked my surgeon if they were made out of gold, at which point he told me a story about a recent med (also eye drop) that had been prescribed to patients with glaucoma... Not expensive, but with good results. I think he said something like 30 bucks a bottle. Anyway, long story short, they began noticing improvement in their patients with macular degeneration, up until then, an affliction that no drops had improved, so they started to order it for this purpose. As soon as the pharm that produced these drops got wind of this, they upped the price to some obscene amount... $1500 per bottle rings a bell but I can't swear to that... Could have been more.
Anyway, he said he and his colleagues were furious when they discovered this and were working to have it changed, but in the mean time, his patients who might benefit cannot afford it. He was quite livid as he told me this and he didn't mince words when he described them.
indepat
(20,899 posts)control. Yeah USA. Go bidness, for the bidness of America is bidness 'cause government is in the bidness of being of, by, and for bidness.
Enthusiast
(50,983 posts)SHRED
(28,136 posts)frwrfpos
(517 posts)sick fucking greed. Kill Capitalism
Hoyt
(54,770 posts)Leaving the drug off the formularies is the right thing to do if the article is correct about other drugs being available.
One of the biggest costs in health care is new drugs that do little -- if anything -- to improve patient outcomes.
Unfortunately, in other circumstances, people complain about the insurer refusing to cover the drugs.
SHRED
(28,136 posts)...is interferon based. A nasty drug with many adverse side effects. Many people can't tolerate it.
For those in the Gilead drug trials the new drug has been a life saver with little to no side effects.
Hoyt
(54,770 posts)SHRED
(28,136 posts)El_Johns
(1,805 posts)Gilead is the equivalent of people hawking bottled water to the victims of the W. Va chemical spill at $300,000 a bottle.
Chakaconcarne
(2,462 posts)Here is another problem..... Prisoners, mental health patients in very large numbers (80-90%) have Hep C.. Most (if not all) states cannot deny treatment to these patients. They (states) will not be able to deny this treatment and it will put a huge burden on state resources.
Manifestor_of_Light
(21,046 posts)They are anti-inflammatory for allergies, no new drugs in them. Just some kind of corticosteroid.
Five milliliters goes for $140.00.
SunSeeker
(51,675 posts)Except when a drug compnay does it, it's legal.
Submariner
(12,509 posts)These pharma guys must go to some university for a PhD in predatory practices..How to fuck over your fellow human and feel good about it 101.
jtuck004
(15,882 posts)Last edited Thu Jan 30, 2014, 10:02 PM - Edit history (1)
And it's way up there in the pain-inducing category.
It's the industry, and why we get the results we do compared to other places.
Wonder what it would have been like had NAFTA opened our borders to Doctors and other professionals? Would be a lot more choice at lower cost out there, people who give perfectly adequate care outside of this country now.
But I digress
blkmusclmachine
(16,149 posts)El_Johns
(1,805 posts)These people are beyond fucked up.
Board of directors
Carla A. Hills (former HUD Secretary)
John F. Cogan, PhD
Étienne Davignon (former VP of the European Commission)
Gayle Edlund Wilson (ex-Gov of California Pete Wilson's wife)
George P. Shultz (emeritus) (former Sec. of State, etc.)
John C. Martin (CEO)
Nicholas G. Moore (Wells-Fargo CEO, Bush-Cheney 2004)
Paul Berg (Nobel laureate in chemistry)
Don Rumsfeld was a former long-term board member too.
brett_jv
(1,245 posts)With that BoD they sound like the Carlyle Group of pharmaceuticals.
This shit makes me FURIOUS.
How can this shit be legal? Insurance companies have big bucks too ... why wouldn't they fight this kinda crap through the courts and lobbyists, I wonder?
LuckyLib
(6,819 posts)Bombero1956
(3,539 posts)Cost per dose $17,000. Cost for one year of treatments $500,000. She lucked out when the hospital and manufacturer donated the drug and services so she could test it for them.
JNelson6563
(28,151 posts)My co-worker had breast cancer and had a lumpectomy. She had to have chemo and for every session she had to have a shot that was nearly ten grand. What in the hell could possibly be so rare, so valuable that a syringe of it costs 10,000.00???
Julie
valerief
(53,235 posts)the US govt.
unionguy
(6 posts)I go every week to get a shot for an autoimmune problem. I get about 200 micrograms. Take a syringe as round as a pencil and put a quarter inch in it. $2500.00 a shot, I've been going for 2 years, that works out to $260,000.00, that is just for the medication. Think they are making money? It's insane what these companies are doing. We need Lizzie Warren to turn an eye their direction also.
hunter
(38,326 posts)A real government would nationalize the corporation and release the patents.
These corporations need something to be scared of.
Unfortunately, they own the government too.
Pharmaceutical research ought to be heavily funded by the government and released to the world free of charge. With just a fraction of the money we spend on offensive weapons (like aircraft carriers and predator drones...) the U.S.A. could be making friends and allies everywhere.
Save someone's life with an innovative pharmaceutical, make dozens of friends. Blow someone up using a predator drone, make dozens of enemies.
freebrew
(1,917 posts)It took 22 treatments to clear an attack that should have been avoided entirely.
The drug: Panhematin, only used here in the US. All other countries I'm aware of use the much cheaper Heme Argenate, but not recommended treatment here. Prolly not enough Profit$?
villager
(26,001 posts)You should try to be more rational!
Humanist_Activist
(7,670 posts)To avoid future embarrassment.
villager
(26,001 posts)n/t
Humanist_Activist
(7,670 posts)and the obscene profit margins and markups of all aspect of health care system is irrational?
Can you explain this, or just admit you used the word woo in a context it quite literally makes no sense in.
http://www.skepdic.com/woowoo.html
fascisthunter
(29,381 posts)Like a moth to a light bulb... incredible.
Humanist_Activist
(7,670 posts)Yet will happily pay up to a couple of dollars a pill for flour in a capsule.
fascisthunter
(29,381 posts)wooo....wooooo
One_Life_To_Give
(6,036 posts)Evaluating the cost of just production is like stating a book is the value of paper and ink alone.
We need to know what the total one time R&D costs were and expect that to be recouped over the first 3-5 yrs of production. At 17,000 new cases per year. Even if they are all treated for $84k/ea would be appropriate for an upfront R&D expense of $4.5Billion.
Too high perhaps. But there is insufficient data to determine just where the appropriate return on investment should be.
niyad
(113,546 posts)L0oniX
(31,493 posts)IDemo
(16,926 posts)ProSense
(116,464 posts)<...>
Finally, Gilead did not pay to research and develop Sovaldi. In 2011, it purchased Pharmasset, the company that had already developed the drug, for $11 billion in cash.The pricing of Sovaldi is being driven by Gileads desire to recoup its investment in Pharmasset, and assumes it can accomplish this by charging Medicaid and other taxpayer-funded programs whatever it wants.
Private drug plans have taken notice of these factsalong with community outrage over the cost of Sovaldiand have delayed paying for the drug until Gilead agrees to significantly lower the price. For example, Express Scripts, CVS Caremark, Catamaran Inc., and Aetna are all taking steps to block or delay the use of Sovaldi.3 Given this, AHF believes it is imprudent for your state to cover this medication until a better price is available.
... the predatory practices of drug companies. Note this is about Medicaid, which has one of the strongest drug-pricing policies in place. This company simply decided to price its drug at whatever the hell it wants to.
The ACA increased the Medicaid rebate percentage.
http://www.medicaid.gov/AffordableCareAct/Timeline/Timeline.html
<...>
The Medicaid Drug Rebate Program is a partnership between CMS, State Medicaid Agencies, and participating drug manufacturers that helps to offset the Federal and State costs of most outpatient prescription drugs dispensed to Medicaid patients. Approximately 600 drug manufacturers currently participate in this program. All fifty States and the District of Columbia cover prescription drugs under the Medicaid Drug Rebate Program, which is authorized by Section 1927 of the Social Security Act.
The program requires a drug manufacturer to enter into, and have in effect, a national rebate agreement with the Secretary of the Department of Health and Human Services (HHS) in exchange for State Medicaid coverage of most of the manufacturers drugs. When a manufacturers markets a new drug and electronically lists it with the FDA, they must also submit the drug to the Drug Data Reporting (DDR) system. This ensures that states are aware of the newly marketed drug. In addition, Section II(g) of the Rebate Agreement explains that labelers are responsible for notifying states of a new drugs coverage. Labelers are required to report all covered outpatient drugs under their labeler code to the Medicaid Drug Rebate Program. They may not be selective in reporting their NDC's to the program. Manufacturers are then responsible for paying a rebate on those drugs each time that they are dispensed to Medicaid patients. These rebates are paid by drug manufacturers on a quarterly basis and are shared between the States and the Federal government to offset the overall cost of prescription drugs under the Medicaid Program.
http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Benefits/Prescription-Drugs/Medicaid-Drug-Rebate-Program.html
<...>
Best Price. A third argument is that it makes sense for Medicare to receive the best price available for prescription drugs, just like Medicaid and the VA. In Medicaid, the drug manufacturer provides the federal government discounts for drugs, which are shared with the states. The discount is either the minimum drug amount or an amount based on the best price paid by private drug purchasers, whichever is less. Current law requires drug companies to charge Medicaid 23 percent less than the average price they receive for the sale of a drug to retail pharmacies. Drug companies also must provide another discount if a drugs price rises faster than the rate of inflation (Thomas and Pear, 2013)...Medicaid rebates, if applied to Part D, would save the federal government money. According to a 2011 study conducted by the Office of the Inspector General (OIG) for the U.S. Department of Health and Human Services, Medicaid rebates were three times greater than the discounts negotiated by Part D for 100 brand name drugs. In 68 of these drugs, Medicaid rebates were twice as high as rebates granted by the drug companies for Medicare drugs (OIG HHS, 2011; Hulsey, 2013). Similarly, a 2008 study of drug pricing information by the U.S. House Committee on Oversight and Government Reform found that Part D paid, on average, 30 percent more for drugs than Medicaid (Hulsey, 2013).
- more -
http://www.ncpssm.org/PublicPolicy/Medicare/Documents/ArticleID/1138/Issue-Brief-Medicare-Drug-Negotiation-and-Rebates