Medicaid

Pursuant to a legislative requirement, GAO provided information on the effects of the Omnibus Budget Reconciliation Act of 1990 (OBRA), which requires drug manufacturers to give rebates to state Medicaid programs based on the discounts offered to large purchasers, focusing on: (1) how the Department of Veterans Affairs (VA) and the Department of Defense (DOD) prescription drug prices had changed; and (2) what effect OBRA had on agency costs.

GAO found that: (1) although both VA and DOD have experienced increases in prescription drug prices since the enactment of OBRA, it is difficult to determine whether the effect of these price changes on overall costs because neither agency maintains centralized price and utilization information for prescription drug buys; (2) prices for drugs purchased from the Federal Supply Schedule, a main source of drug purchases for about 10,000 pharmaceutical and drug items, have on average increased at almost twice the 8.3 percent increase in the 1990 producer price index for prescription drugs; (3) prices for widely used drugs stocked by VA and DOD supply depots increased at about the 1990 inflationary rate; (4) price changes for 50 drugs used by 7 VA medical centers indicate that each center's costs will increase over fiscal year 1990; (5) 5 of the 7 centers will experience cost increases of from 8 percent to 11 percent, while the other centers' costs will increase by 17 percent and 26 percent; (6) VA estimates that the higher prices will increase VA costs by $28 million or about 21 percent over 1990 costs; and (7) DOD estimates that price increases for a sample of 25 drugs will increase the military services' costs by about $5.8 million or about 14 percent over 1990 costs.