Medicare Illegally Paid for Seniors’ Viagra, U.S. Audit Says

The U.S. Medicare program improperly spent more than $3 million in 2007 and 2008 to buy Pfizer Inc. (PFE)’s Viagra and other erectile dysfunction drugs for senior citizens, government investigators said.

The purchases violated a 2005 ban on covering the drugs under the U.S. health program for the elderly and disabled. Medicare administrators blamed the spending on a software error and said they would try to recover payments to private insurers who administer the program’s drug plans.

Medicare “should not have covered these drugs,” George Reeb, acting deputy inspector general for audit services at the U.S. Department of Health and Human Services, wrote in a report released today. He recommended that Medicare work with the Food and Drug Administration to maintain a list of prohibited drugs. Medicare administrators, in a response to the report, rejected the suggestion as unnecessary.

Medicare paid a total of $3.1 million for erectile dysfunction drugs in the period examined, more than $3 million of which was for Viagra, which had 2010 sales of $1.9 billion based on data compiled by Bloomberg. Other drugs purchased included Eli Lilly & Co. (LLY)’s Cialis, the report said.

The purchases were a fraction of Medicare’s drug spending in 2007 and 2008, which totaled $133 billion, according to the report

Medicare’s administrators told the inspector general that they would fix the flaw by updating computer databases with codes for the prohibited drugs. Medicare also paid for an undetermined amount for erectile dysfunction drugs in 2009 and 2010, Reeb said.

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net.

To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net.

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