Last Updated Nov 15, 2010 3:25 PM EST
Instead, both institutions must take a price based on the "average wholesale price" of a drug. Naturally, drug companies have developed a number of complicated schemes to make sure that the reported AWP is as high as possible while the actual price is made much lower, usually through a series of rebates. Medicaid and Medicare reimburse at the high rate and wholesalers pocket the difference. Drug companies strategize around that difference so that it functions like a kickback to wholesalers.
Baxter was probably selling saline solution and dextrose solution, in intravenous drip bags. They're a little more difficult to produce and package than tabletop salt and sugar, but not much. The AWP of saline (to rehydrate patients) and dextrose (for acute hypoglycemia) is just $1.71 to $2.75 a bag. That's a 41,000 percent markup, Louisiana claims.
Louisiana spends $850 million a year on Medicaid. It would cost taxpayers nothing if the law was changed to allow states and the federal government to negotiate more aggressively. It would only lead to savings and lowered public spending on healthcare. Washington, unfortunately, is so broken that there is bipartisan agreement that such a change will never be made, which is why healthcare reform was passed without such a provision.
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