Medicare overpaid on drugs, report says

Medicare overpaid for drugs that had generic versions because of a time lag in computing prices from when the cheaper medicines became available, the U.S. Health and Human Services Department’s inspector general said.

Payments for cancer drug irinotecan, sold by Pfizer Inc. as Camptosar, remained at more than double the average manufacturer’s sales price after the generic version was cleared for sale Feb. 20, said the report, released Tuesday. Medicare, the health insurance program for the elderly and disabled, would have saved $6.5 million in March had it factored the generic price into its rate.

The agency’s two-month delay in incorporating new, generic prices into its payment calculation is the reason for the higher payments, the inspector general wrote.

The report urged Medicare to devise a formula that more quickly takes into account market prices of generic versions of brand-name drugs. The inspector general’s office said overpayments apply to other drugs with new generics.

Medicare agreed that it should move more quickly to ensure that payments “accurately reflect market prices.”