Committee Correspondence

The House Committee on Energy and Commerce

Energy and Commerce Leaders Questioning U.S. Oncology

June 26, 2003

Mr. R. Dale Ross
Chairman and Chief Executive Officer
U.S. Oncology
16825 Northchase Drive
Suite 1300
Houston, TX 77060

Dear Mr. Ross:

The Committee on Energy and Commerce is conducting an investigation into pharmaceutical reimbursements and rebates under Medicaid. This inquiry builds upon the earlier work by this Committee on the relationship between the drug pricing practices of certain pharmaceutical companies and reimbursement rates under the Medicare program. In that investigation, the Committee uncovered significant discrepancies between what some pharmaceutical companies charged providers for certain drugs and what Medicare then reimbursed those providers for dispensing those drugs. This price difference resulted in profit incentives for providers to use the drugs of specific companies as well as higher costs to the Medicare system and the patients it serves. For example, we learned that one manufacturer sold a chemotherapy drug to a health care provider for $7.50, when the reported price for Medicare was $740. The taxpayer therefore reimbursed the doctor almost $600 for dispensing the drug and the cancer patient had a $148 co-payment. Such practices are unacceptable in the view of the Committee, which is why we are in the process of moving legislation to address these abuses.

The Committee has similar concerns regarding drug prices in Medicaid, which has a substantially larger pharmaceutical benefit than Medicare. For this Medicaid investigation, we are requesting information from U.S. Oncology not only as one of the largest purchasers of oncology drugs nationwide but also as an entity identified in the earlier Medicare investigation whose physician members reaped large gains from reimbursements. Indeed, in a September 19, 2001 letter to this Committee, U.S. Oncology admitted that "reimbursement for oncology pharmaceuticals is too high."

In light of the foregoing and in order for this Committee to effectively and efficiently conduct this review, we are requesting that, pursuant to Rules X and XI of the U.S. House of Representatives, you provide the Committee with the following records and information by July 11, 2003. For the purposes of these requests, please observe the following definitions: "subject drugs" means all drugs listed in Attachment I, in all dosages, strengths or volumes, and regardless of any packaging, labeling or identifiers; "purchaser" means any wholesaler, distributor, retailer, provider, doctor, hospital, pharmacy, health maintenance organization, or any other such entity that obtains the subject drugs at any cost, including free of charge; and "spread" means the difference between the cost of the drug to the purchaser and the reimbursement amount the purchaser may receive from any State's Medicaid program, including, but not limited to, (1) the difference between the cost or price to the purchaser and actual or anticipated Medicaid reimbursement or, (2) the difference between the cost or price to the purchaser and any price or cost submitted, or caused to be submitted by the drug's manufacturer, to any State, Federal agency or Medical Economics Red Book, First Data Bank or Medi-Span or any other such entity that gathers and publishes drug cost or pricing data, such as "average wholesale price" or "wholesale acquisition cost."

Further, for the purposes of responding to these requests, where providing records or information, please separate and distinguish such records or information, to the extent possible, by each applicable National Drug Code ("NDC") and Healthcare Common Procedural Coding System code. Also, for the purposes of responding to these requests, please do not produce any specific patient medical information. Finally, please note that these requests are directed to your company and any and all related corporate entities that may have responsive documents or information, including, but not limited to, any parents, subsidiaries, partnerships, or joint ventures.

1. For the period beginning January 1, 1998, and for each subsequent calendar quarter, and with respect to each subject drug, please provide the following information using the format of the chart below:

1. the total volume purchased (by either U.S. Oncology or any network member pursuant to purchasing contracts or agreements negotiated by your company on their behalf) in units;

2. the total amount paid in dollars (by either U.S. Oncology or any network member pursuant to purchasing contracts or agreements negotiated by your company on their behalf) for each subject drug identified in 1(a) above (after subtracting all discounts, rebates, or charge-backs received from any source for such drug);

3. the total volume of each subject drug (in units) received as free goods (by either U.S. Oncology or any network member pursuant to contracts or agreements negotiated by your company on their behalf);

4. the total volume in units of each subject drug utilized with respect to Medicaid beneficiaries (by either U.S. Oncology or any network member); and

5. the total amount received in dollars (by either U.S. Oncology or any network member) from Medicaid as reimbursement for each subject drug.

2. For the period beginning January 1, 1998, to the present, has the spread of any subject drug ever been discussed or considered in the negotiations or decisions relating to purchasing or utilizing a subject drug? If so, please describe the circumstances surrounding such discussions or considerations, and provide all records relating thereto.

3. For the period of January 1, 1998, to the present, and with respect to each subject drug, please provide all records relating to purchase, utilization, distribution, marketing, sales or promotion that are based upon, consider, or incorporate, in any way, the spread.

4. For the period of January 1, 1998, to the present, please provide all records relating to comparisons between the spread of any subject drug and the spread of any generic or therapeutically equivalent product.

5. For the period beginning January 1, 1998, to the present, please provide all records authored or generated, in any way, by U.S. Oncology, relating to the health effects of any of the subject drugs.

6. For the period of January 1, 1998, to the present, please provide each contract or agreement governing your relationship, and/or the relationship of your network members, with each seller of each subject drug.

7. For the period beginning January 1, 1998, and for each subsequent calendar quarter, please list your top five network members (in terms of utilization) for each subject drug purchased pursuant to purchasing contracts or agreements negotiated by your company on their behalf, and for each such member, state the volume (in units) of each subject drug utilized each quarter and the range of prices paid by such member to purchase such drug during that same period.

8. For the period of January 1, 1998, to the present, please state whether your members were ever obligated, incentivized, required or encouraged to utilize certain drugs covered by purchasing contracts or agreements negotiated by your company. If so, please describe the circumstances surrounding such obligations, incentives, requirements or encouragement, and provide all records relating thereto.

9. For the period beginning January 1, 1998, to the present, please provide all records relating to any obligations, incentives, requirements or encouragement of your members to utilize certain drugs covered by purchasing contracts or agreements negotiated by your company.

Please note that, for the purpose of responding to the above requests, the terms "records" and "relating" should be interpreted in accordance with Attachment II to this letter. If you have any questions, please contact Mr. Mark Paoletta, Chief Counsel for Oversight and Investigations, at (202) 225-2927.

Sincerely,

W.J. "Billy" Tauzin
Chairman

James C. Greenwood
Chairman
Subcommittee on Oversight and Investigations

cc: The Honorable John D. Dingell, Ranking Member
The Honorable Peter Deutsch, Ranking Member
Subcommittee on Oversight and Investigations

Attachments

ATTACHMENT I

1. For the purposes of this letter, "subject drugs" include:

· Adriamycin RFD & PFS (doxorubicin HCl)

· Aromasin (exemestane)

· Anzemet (dolasetron)

· Blenoxane (bleomycin sulfate)

· Camptosar (irinotecan HCl)

· cyclophosphamide

· Cytoxan (cyclophosphamide)

· doxorubicin HCl

· etoposide

· Intron A (interferon alfa-2b recombinant)

· Kytril (granisetron)

· leucovorin

· Onxol (paclitaxel)

· paclitaxel

· Taxol (paclitaxel)

· Temodar (temozolomide)

· Vepisid (etoposide)

· Zofran (ondanseteron)

ATTACHMENT II

1. The term "records" is to be construed in the broadest sense and shall mean any written or graphic material, however produced or reproduced, of any kind or description, consisting of the original and any non-identical copy (whether different from the original because of notes made on or attached to such copy or otherwise) and drafts and both sides thereof, whether printed or recorded electronically or magnetically or stored in any type of data bank, including, but not limited to, the following: correspondence, memoranda, records, summaries of personal conversations or interviews, minutes or records of meetings or conferences, opinions or reports of consultants, projections, statistical statements, drafts, contracts, agreements, purchase orders, invoices, confirmations, telegraphs, telexes, agendas, books, notes, pamphlets, periodicals, reports, studies, evaluations, opinions, logs, diaries, desk calendars, appointment books, tape recordings, video recordings, e-mails, voice mails, computer tapes, or other computer stored matter, magnetic tapes, microfilm, microfiche, punch cards, all other records kept by electronic, photographic, or mechanical means, charts, photographs, notebooks, drawings, plans, inter-office communications, intra-office and intra-departmental communications, transcripts, checks and canceled checks, bank statements, ledgers, books, records or statements of accounts, and papers and things similar to any of the foregoing, however denominated.

2. The terms "relating," "relate," or "regarding" as to any given subject means anything that constitutes, contains, embodies, identifies, deals with, or is in any manner whatsoever pertinent to that subject, including but not limited to records concerning the preparation of other records.

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