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HRD-81-36 1 (1980-12-31)

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REPORT BY THE


Comptroller General


OF THE UNITED STATES

RELEASED                   ..,



Programs To Control Prescription

Drug Costs Under Medicaid And

Medicare Could Be Strengthened


In August 1976 the Department of Health
and Human Services (HHS) put into effect
two programs to control the costs of prescrip-
tion drugs under Medicaid and Medicare. One
program--Maximum Allowable Cost  (or
MAC)--was designed to take advantage of
competition in the drug market by estab-
lishing price limits for drugs available from
more than one source. This, in turn, involved
substituting a lower cost generic drug with the
same therapeutic effect for a brand-name drug.

Although GAO did not attempt to settle the
scientific disagreements over drug quality and
therapeutic equivalence, it did conclude that
MAC has resulted in savings under the State-
operated Medicaid outpatient drug programs.

This savings could have been greater, however,
if (1) States had implemented the limits in a
more timely manner, (2) HHS had systemat-
ically updated the limits, and (3) HHS had en-
couraged States to implement or expand their
own MAC programs. MAC has had little im-
pact on the cost of drugs under Medicare
because those covered under the program are
not purchased in large quantities by hospitals.


114311


       HRD-81-36
DECEMBER 31, 1980


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