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NY Times, October 24, 2002

Two major drug companies said yesterday that they would return to the original, deeper discounts that they had been offering to low-income elderly people after they received a letter from the Bush administration stating that the government would not try to demand similar low prices.

On Oct. 1, the two companies, GlaxoSmithKline and Bristol-Myers Squibb, cut back on discounts that they had promised to low-income people after becoming concerned that federal officials would demand the same discounts for the government's Medicaid program, which provides health care for the poor.

Under federal law, drug makers must offer Medicaid the lowest price available to any buyer.

GlaxoSmithKline and Bristol-Myers are among seven drug makers that recently began offering discounted prescriptions through a program called Together Rx. A spokesman for the group said earlier this month that other companies were also considering cutting back on the discounts because of fears that the government would request the same low prices, which could cost drug makers tens of millions of dollars.

In recent weeks, the companies have met with federal officials to try to resolve the issue.

The drug makers received a letter yesterday from Thomas A. Scully, administrator of the Centers for Medicare and Medicaid Services, saying the agency had reviewed the methods the companies were using to calculate the discounts. Mr. Scully said the discounts offered under the program were similar to "direct-to-patient coupons," which are exempt from the law requiring drug companies to give the Medicaid program their lowest price.

"This is good news," said Patricia R. Seif, a spokeswoman for GlaxoSmithKline. "We're restoring the original saving levels."

Both GlaxoSmithKline and Bristol-Myers said they planned to reimburse any patient enrolled in the Together Rx program who had paid a higher price this month for drugs.

Doug Arbesfeld, a spokesman for Johnson & Johnson, said that 15,000 to 20,000 people were signing up for the Together Rx program each week. More than 300,000 have signed up so far, he said.

Besides Bristol-Myers, GlaxoSmithKline and Johnson & Johnson, the companies offering discounts under the program are Aventis, AstraZeneca, Abbott Laboratories and Novartis.

Two other companies, Pfizer and Eli Lilly, have separate programs that offer discounted drugs to low-income elderly people.

The programs are aimed at helping low-income elderly patients who are not poor enough to be covered by Medicaid but do not have private insurance to help pay for their medicines.

The drug companies, faced with heavy criticism because of their high prices, began offering the discount programs in the last year.

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