Drug Makers Cutting Back on Discounts for the Elderly Bristol-Myers Squibb and GlaxoSmithKline said that they had raised the prices they offer in a widely promoted discount program out of concern that federal officials will demand similar deep discounts for the government Medicaid program, which provides health care for the poor. But federal officials expressed surprise at the moves and said that they had not taken any action against the discount plans. At issue is whether the discounts by the two companies � as well as those offered by five other drug companies, all under a program called Together Rx � are subject to a federal law requiring drug makers to offer the Medicaid program the lowest price available to any buyer. For some of the 300,000 low-income people participating in Together Rx, the higher prices will hurt. For example, Bristol-Myers said it had been offering a month's supply of the cholesterol-lowering drug Pravachol for $15 to elderly people with incomes of $18,000 or less. On Tuesday, the company raised the price to $59. Under GlaxoSmithKline's plan, patients will get roughly a 25 percent discount from retail drugstore prices, the company said, rather than 33 percent. For asthma patients, for example, an Advair Diskus will cost $118. Previously, patients paid $106 for that drug. Thomas A. Scully, administrator of the Centers for Medicare and Medicaid Services, said this week that he was perplexed by the moves to reduce the discounts. "We have had hours of meetings with them trying to make sure we did not impact their discount programs," he said. Mr. Scully said he believed that the two drug companies had decided to raise their prices for a reason unrelated to the government. "Unless I see some solid evidence, I don't believe it is related to Medicaid," he said. At the request of one drug company, Mr. Scully sent a letter to the industry's trade group in June explaining the circumstances in which a discount plan could prompt the government to demand comparable prices. The letter left GlaxoSmithKline executives concerned that their program could force the Medicaid pricing rule to go into effect, said Mary Anne Rhyne, a company spokeswoman. A meeting with federal officials late last month confirmed those concerns, she said, prompting the company to raise its prices to try to avoid enforcement of the law. Extending the discounts to the Medicaid program could cost the drug companies hundreds of millions of dollars. State and federal governments spent $20 billion on prescription drugs last year for the 42 million Medicaid beneficiaries, an increase of more than 12 percent over 2000. A year ago, GlaxoSmithKline became the first company to offer discounts to low-income elderly people who were not poor enough to be covered by the Medicaid program but did not have private insurance to cover their prescription medicines. Under heavy public criticism for high drug prices, other manufacturers followed suit. The seven companies participating in the Together Rx program say that qualifying elderly people receive discounts of 20 percent to 40 percent off the prices they would normally pay at pharmacies. http://www.nytimes.com/2002/10/05/business/05DRUG.html