Review of EPOGEN Reimbursement

EXECUTIVE SUMMARY:

This final audit report points out that Medicare reimbursement for the drug EPOGEN (EPO) should be reduced to reflect current market prices. The Social Security Act provides that, effective January 1, 1995, the Secretary of the Department of Health and Human Services can set an appropriate reimbursement level for EPO. Our review disclosed that the current EPO reimbursement rate of $10 per 1000 units administered exceeds the current cost of purchasing EPO by approximately $1. Accordingly, we recommended that the Secretary consider reducing Medicare reimbursement to $9 per 1000 units administered. This will result in savings to the Medicare program of approximately $94 million and to Medicare beneficiaries of approximately $24 million per year beginning in 1998. The Health Care Financing Administration concurred with our recommendation and intends to pursue this change either through the rulemaking process or as a legislative initiative in the President's Fiscal Year 1999 Budget.

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