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Congress investigates Medicaid

Are giant drug store chains fleecing America? NBC's Chip Reid reports on a congressional investigation that found pharmacists reaping windfall profits at the expense of Medicaid.

The nation's pharmacists are reaping windfall profits at the expense of Medicaid, the government health care program for the poor. That, according to a congressional investigation unveiled Tuesday.

"It seems to me this is the proverbial $500 toilet seat of Medicaid," says Rep. Greg Walden, R-Ore.

An example — Fluoxetine — the generic version of the popular antidepressant Prozac. Here's how congressional investigators say it works: pharmacists pay 36 cents a capsule, but are reimbursed 98 cents a capsule by Medicaid, nearly three-times the real price.

Under the current system, that Medicaid reimbursement rate is set by the drug manufacturers. Committee investigators say in-house e-mails show drug companies and pharmacists have worked together to keep Medicaid reimbursement rates artificially high.

"The current reimbursement system practically begs to be exploited," says Rep. Ed Markey, D-Mass.

The National Association of Chain Drug Stores responds that Medicaid reimbursements are not excessive, because the payment has to cover a pharmacy's cost of "buying the drug, dispensing the drug, and earning a reasonable return."

But witnesses at Tuesday’s hearing said Medicaid reimbursement can be more than ten-times what pharmacists actually pay for drugs. Government investigators say the loss to Medicaid could be as much as $1.5 billion dollars a year.

Who loses out? The taxpayer.

Some committee members say the problem is the system for Medicaid reimbursement — a system that was created by — you guessed it — Congress.

"If we found an enemy here it is us, the United States Congress, to create a system that has a perverse incentive in it," says Rep. Mike Rogers, R-Mich.

Some representatives of the drug and pharmacy industries called for reform.

"The system is broken and there really needs to be a reimbursement rate set by somebody outside," says Pamela Marrs, the senior vice president and CFO of drug manufacturer Dey, Inc.

But until that happens Medicaid drug reimbursement will remains a fleecing of America with plenty of blame to go around.