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Pricing Data Rule Revised to 10 Years

Donna Young

After two members of Congress and 46 attorneys general condemned a federal rule that would let pharmaceutical companies destroy product-pricing data after three years, the Centers for Medicare & Medicaid Services (CMS) temporarily extended the record-keeping requirement to 10 years.

In two separate notices in the January 6 Federal Register, CMS announced an interim final rule with comment period that imposes a 10-year record-keeping requirement ending December 31, 2004, and a proposed rule that would make the 10-year retention requirement permanent.

The agency will accept comments until March 8.

The new 10-year requirement is a "significant improvement that will help protect American taxpayers," Representative Henry A. Waxman (D-California)—a longtime Medicaid advocate—said in an e-mail response.

CMS proclaimed last August that beginning January 1, 2004, drug companies that participate in the Medicaid rebate program would be allowed to destroy data used to calculate average manufacturer prices and best prices three years after a company had reported the information to the agency.

Manufacturers that give large discounts to private-sector purchasers must give the same discounts to Medicaid and 340B-covered entities.

Waxman and Senator Charles Grassley (R-Iowa) joined 46 chief law officers in a protest against the three-year record retention rule (December 15, 2003, AJHP News).

The attorneys general, in an October 2003 letter to federal administrators, charged that "dozens of pending cases and investigations" involving allegations of fraudulent pricing practices by drug companies relied on records that went back "well beyond the last three years."

A three-year limit would make it easier for pharmaceutical companies to cheat programs serving the poor and the taxpayers who support those programs, Waxman contended.

Grassley and Waxman shared concern with the 46 attorneys general that if drug companies were allowed to destroy pricing data after three years it would limit a whistleblower's ability to file a lawsuit in the name of the government under the Federal Civil False Claims Act—which has a 10-year filing limit.

Grassley said that the three-year retention rule would weaken the False Claims Act, according to a November 6, 2003, statement. The Iowa senator had also criticized the CMS rule in an October 17, 2003, letter to Department of Health and Human Services Secretary Tommy G. Thompson.

In a November letter to CMS, Waxman noted that since 2001, six pharmaceutical manufacturers—AstraZeneca, Bayer AG, Dey Laboratories, GlaxoSmithKline, Pfizer, and Tap Pharmaceuticals—have agreed to pay a total of $1.6 billion to resolve allegations of Medicare and Medicaid drug-pricing and marketing fraud as a result of seven whistleblower cases filed under the False Claims Act.

Waxman based his statement on a November 2003 report, Reducing Medicare and Medicaid Fraud by Drug Manufacturers: The Role of the False Claims Act, by the watchdog group Taxpayers Against Fraud Education Fund.

To put the $1.6 billion settlement figure into perspective, the report's author states, the total amount spent by the federal government in fiscal year 2003 on prevention and control of infectious diseases, including HIV, tuberculosis, West Nile virus, and severe acute respiratory syndrome, was $1.6 billion.

"The findings in this report make it abundantly clear that allowing drug manufacturers to destroy Medicaid pricing records after just three years could make it easier for an unscrupulous drug manufacturer to defraud the Medicaid system and to avoid full recompense if they are apprehended, with huge costs to the taxpayers," Waxman said in his November letter.

The California congressman urged CMS to revise its rule to require manufacturers to maintain pricing records for up to 10 years—the statute of limitations for the False Claims Act—to "adequately protect taxpayers and the Medicaid program."

"After further consideration," CMS said in the January 6 notice, "we believe that, due to potential fraud and abuse violations and litigation, a 10-year record-keeping requirement will be more appropriate and sufficient" to ensure that investigations by law enforcement are not hindered.

Grassley called CMS's decision to change the rule from 3 to 10 years "the right course of action."

"Instead of making it easier for those defrauding the Medicaid drug rebate program to get away with breaking the law, we should be making it easier to identify and prosecute those who are ripping off the taxpayers and taking away from a program that lower-income beneficiaries depend on," he said in a January 7 statement.

David Parrella, director of the National Association of State Medicaid Directors, said that "pharmaceutical manufacturers should be required to keep their records for the full 10 years to assist the states in any issues and disputes arising from the collection of rebates."

However, the 10-year requirement is not a final rule and could again be revised based on comments CMS receives, an agency spokeswoman said.

Ted Slafsky, director of the Public Hospital Pharmacy Coalition, said that, while he is pleased that "the government has had a change of heart on this issue," his organization believes that manufacturers should be required to keep pricing data "indefinitely."