United States Government Accountability Office

GAO Testimony 

Before the Subcommittee on Federal Financial 

Management, Government Information, and 

International Security, Committee on Homeland 

Security and Governmental Affairs, U.S. Senate 

RYAN WHITE CARE ACT

AIDS Drug Assistance 

Programs, Perinatal HIV 

Transmission, and Partner 

Notification 

Statement of Marcia Crosse 

Director, Health Care 

For Release on Delivery

Expected at 2:30 p.m. EDT

Wednesday, April 26, 2006

 

GAO-06-681T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

April 26, 2006

RYAN WHITE CARE ACT 

AIDS Drug Assistance Programs, 

Perinatal HIV Transmission, and Partner 

Notification 

Highlights of GAO-06-681T, a testimony 

before the Subcommittee on Federal 

Financial Management, Government 

Information, and International Security, 

Committee on Homeland Security and 

Governmental Affairs, U.S. Senate 

Despite progress in HIV/AIDS drug 

treatments and the reduction of

AIDS mortality in the United States, 

challenges remain concerning the 

availability of these drugs for 

individuals with HIV/AIDS and the 

prevention of new cases. The 

CARE Act authorizes grants to the 

states and certain territories 

specifically for AIDS Drug

Assistance Programs (ADAP) to 

purchase and provide HIV/AIDS

drugs to eligible individuals. In its 

report issued today, Ryan White 

CARE Act: Improved Oversight 

Needed to Ensure AIDS Drug 

Assistance Programs Obtain Best 

Prices for Drugs (GAO-06-646),

GAO examines the program design

of ADAPs in the 50 states, the 

District of Columbia, and Puerto 

Rico, their funding sources, and 

drug purchasing. GAO also reports

on state approaches to reducing

perinatal HIV transmissions and 

identifying and notifying partners 

of HIV-infected individuals. 

What GAO Recommends

In its report, GAO recommends

that HRSA require ADAPs to report

the final prices they paid for drugs,

net of any rebates, and that HRSA 

routinely determine whether these 

prices are at or below the 340B

prices. In commenting on these 

recommendations, HRSA stated

that these steps would be labor 

intensive and it lacks capacity to 

carry out such oversight.

Variation in ADAPs’ program design and funding amounts from CARE Act 

grants and other funding sources contribute to differences in coverage—who 

is eligible and what drugs are covered by an ADAP—among the 52 ADAPs 

GAO reviewed. In order to make maximum use of the funding they receive, 

ADAPs are expected to secure the best price available for the drugs on their 

formularies. ADAPs may, but are not required to, purchase their drugs 

through the 340B federal drug pricing program, under which drug 

manufacturers provide discounts on certain drugs to covered entities. The 

Health Resources and Services Administration (HRSA) has identified the 

340B prices as a measure of ADAPs’ economical use of grant funds, but the 

Department of Health and Human Services does not disclose 340B prices to

the ADAPs. GAO found that some ADAPs reported prices that were higher 

than the 340B prices for selected HIV/AIDS drugs. However, these reported 

prices may not have reflected any rebates ADAPs eventually received. While

HRSA is responsible for monitoring whether ADAPs obtain the best prices 

available for drugs, it does not routinely compare the drug prices ADAPs 

report to 340B prices. 

All 50 states, the District of Columbia, and Puerto Rico have policies or have 

enacted laws regarding HIV testing of pregnant women to help reduce 

perinatal HIV transmission. The majority of states have adopted a policy of 

voluntary prenatal HIV testing of pregnant women that is consistent with 

guidelines issued by the Centers for Disease Control and Prevention (CDC). 

GAO contacted 8 states to discuss the approach they use to test pregnant 

women for HIV, and these states use one of two approaches. Consistent with 

additional CDC recommendations on testing, three states routinely include 

HIV tests in standard prenatal testing, but a woman can refuse to be tested 

for HIV. In the other 5 states, a woman must consent to an HIV test, usually 

in writing, before the test can be performed. Six of the 8 states GAO 

contacted report that the number of HIV-positive newborns has declined. 

However, only 3 states GAO contacted collect the data needed to determine 

statewide perinatal HIV transmission rates. 

GAO contacted 12 states regarding their approaches to identifying partners 

of HIV-infected individuals and notifying them of their possible exposure to 

the virus. These states used various approaches in conducting HIV partner 

notification activities as part of their partner counseling and referral 

services. These activities include eliciting partner information from HIVinfected individuals, but the participation of these individuals varies and not 

all partners can be reached to be notified. Of the 12 states contacted, 10 have

statutory or regulatory provisions that require or permit certain health care 

entities or workers to notify partners, including spouses, without the 

consent of the known HIV-infected individual. In the remaining two states, 

public health officials or the health department may notify partners only 

with the consent of the HIV-infected individual. 

www.gao.gov/cgi-bin/getrpt?GAO-06-681T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Marcia Crosse 

at (202) 512-7119 or crossem@gao.gov. 
Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss the AIDS Drug Assistance 

Programs (ADAP) that receive funds under the Ryan White 

Comprehensive AIDS Resources Emergency Act of 1990 (CARE Act)1

 and

to provide a summary of our report that we are releasing today entitled 

Ryan White CARE Act: Improved Oversight Needed to Ensure AIDS Drug

Assistance Programs Obtain Best Prices for Drugs, which was prepared 

at your and others’ request.2

 The report discusses the program design of 

52 ADAPs in the 50 states, the District of Columbia, and Puerto Rico, their

funding sources, and drug purchasing. I will also discuss our examination 

of state prenatal HIV testing and perinatal HIV transmission rates, and 

state approaches to identifying and notifying partners of HIV-infected 

individuals.

The CARE Act authorizes ADAP base grants to the states and certain 

territories specifically for ADAPs to purchase and provide HIV/AIDS drugs 

to eligible individuals. ADAPs serve as the HIV/AIDS drug assistance 

program of last resort for individuals who, for example, cannot afford to 

pay for drugs, do not have insurance coverage for drugs, or do not qualify 

for other federal programs such as Medicaid. As more people with 

HIV/AIDS live longer due to improved drug treatments, particularly highly 

active antiretroviral therapy, the demand for ADAP services will increase, 

and expenditures by ADAPs for HIV/AIDS drugs will also likely increase. It

is, therefore, important that ADAPs achieve the maximum benefit they can

with the funds provided to them for drug purchases. ADAPs may purchase 

their drugs through the 340B federal drug pricing program, under which 

drug manufacturers provide discounts on certain drugs to covered 

entities.3

 Generally, ADAPs can purchase drugs through either the 340B 

direct purchasing option, where ADAPs receive the 340B price discount 

upfront, or through the 340B rebate option, where ADAPs later request a 

 1

Pub. L. No. 101-381, 104 Stat. 576 (codified as amended at 42 U.S.C. §§ 300ff—300ff-111 

(2000)). Unless otherwise indicated, references to the CARE Act are to current law. 

2

GAO-06-646 (Washington, D.C.: Apr. 26, 2006). We previously reported to you on Ryan

White CARE Act funding; see GAO, HIV/AIDS: Changes Needed to Improve the 

Distribution of Ryan White CARE Act and Housing Funds, GAO-06-332 (Washington,

D.C.: Feb. 28, 2006). 

3

Under Section 340B of the Public Health Service Act, a 340B price, sometimes referred to 

as a 340B ceiling price, is established for each covered drug that entities purchase. 42 

U.S.C. § 256b (2000). Covered entities include, for example, community health centers and 

hemophilia treatment centers. 

Page 1 GAO-06-681T 
340B rebate from the drug manufacturers. The Health Resources and 

Services Administration (HRSA) administers CARE Act grants and is 

responsible for monitoring the prices ADAPs pay for drugs. HRSA has 

identified prices under the 340B federal drug pricing program as a measure 

of an ADAP’s economical use of its grant funds. 

In carrying out this work for our report, we interviewed HRSA and other 

officials, analyzed and compared data ADAPs reported on program design, 

funding, and drug prices paid, compared 340B drug prices to prices 

available under other federal drug pricing programs, and interviewed 

officials from selected states about prenatal HIV testing and partner 

notification. We performed our work in accordance with generally 

accepted government auditing standards. The report’s appendix III 

provides a more detailed explanation of our scope and methodology. 

In summary, we report that variation in ADAPs’ program design and 

funding amounts contributed to differences in who and what was covered

by each program, that some ADAPs reported prices that were higher than

the 340B prices for selected HIV/AIDS drugs, that HRSA is not routinely 

comparing the drug prices ADAPs pay to 340B prices, and that 340B prices 

were higher for some selected drugs than the prices available under other 

federal drug pricing programs. However, these latter prices are not 

available to ADAPs, except for prices under one program to the District of 

Columbia ADAP. We also report that the majority of states have adopted a 

policy of voluntary prenatal HIV testing of pregnant women that is 

consistent with guidelines issued by the Centers for Disease Control and 

Prevention (CDC) for reducing perinatal transmission of HIV, and most of 

the 8 states we contacted reported that the number of HIV-positive 

newborns has declined. Further, among efforts to reduce the transmission

of HIV, the 12 states we contacted used various approaches to conduct 

HIV partner notification activities as part of their partner counseling and 

referral programs, but cooperation of infected individuals varies. 

ADAPs’ Program Design 

and Additional Funding 

Variation in ADAPs’ program design and funding amounts from the CARE 

Act grants and other funding sources contributes to differences in 

coverage—who and what is covered by an ADAP. Because of the variation

in program criteria, an individual eligible for ADAP services in one state 

may not be eligible for or receive the same ADAP services in another. 

ADAP income ceilings for individuals, program enrollment caps, and drug 

formularies vary considerably among ADAPs. For example, each ADAP 

determines a maximum income level, or income ceiling, as a criterion for 

an individual’s eligibility for enrollment. ADAPs reported income ceilings 

Page 2 GAO-06-681T 
for the 2004 grant year that ranged from 125 percent of the federal poverty

level in North Carolina to 556 percent in Massachusetts. Sixteen ADAPs 

reported that they had limits on the assets that individuals enrolled in the 

program are allowed to have. Twelve ADAPs reported having caps on 

program enrollment or on amounts expended per individual for HIV/AIDS

drugs. The total number of drugs ADAPs included on their formularies 

ranged from 20 in Colorado to 1,000 in Massachusetts, New Hampshire, 

and New Jersey. 

The additional funding that some ADAPs reported receiving from sources 

other than the ADAP base grant, such as transfers from other CARE Act 

grants, and states’ or other governmental entities’ funds, also varied among 

ADAPs for fiscal year 2004. Funding from these various sources 

significantly increased funds available to cover individuals for some 

ADAPs. For example, in addition to receiving funds from the ADAP base 

grant of about $89.6 million, the California ADAP received about 

$123.5 million from other sources. 

ADAPs’ Reported 

HIV/AIDS Drug Prices 

ADAPs are expected to use every means at their disposal to secure the 

best price available for the drugs on their formularies. ADAPs are eligible, 

if they so choose, to participate in the federal 340B drug pricing program. 

Generally, ADAPs can purchase drugs through either the 340B direct 

purchasing option or through the 340B rebate option. Drug manufacturers 

that participate in the 340B drug pricing program agree to sell drugs to 

340B entities, including ADAPs that participate in the program, at prices 

no higher than 340B prices. 

HRSA has identified the 340B prices as a measure of ADAPs’ economical 

use of grant funds, whether ADAPs use the 340B program, including the 

340B prime vendor—which negotiates prices directly with drug 

manufacturers for ADAPs using the 340B direct purchase option—or 

negotiate drug prices on their own with drug manufacturers. However, the 

Department of Health and Human Services does not disclose to the ADAPs 

or the 340B prime vendor what the 340B prices are that should not be 

exceeded—a situation which disadvantages both the prime vendor’s and 

the ADAPs’ negotiating positions. 

In our analysis using the top 10 HIV/AIDS drugs by ADAP expenditures, we 

found that in 2003 all of the 25 ADAPs that used the 340B direct purchase 

option reported prices to HRSA that were higher than the 340B price for at 

least 1 of the top 10 drugs. For example, 7 of the 25 ADAPs reported 

purchasing the drug Viramune at prices higher than the 340B price. Of the

Page 3 GAO-06-681T 
27 ADAPs that used the 340B rebate option to purchase drugs in 2003, all

except 3 ADAPs reported paying drug prices that were higher than the 

340B prices for many of the top 10 drugs. However, the prices that ADAPs 

using the rebate option report to HRSA for each drug they purchase may 

not reflect the rebates that they eventually receive and therefore may not 

be the final prices these ADAPs pay for the drugs. 

HRSA’s Monitoring of 

ADAPs’ Reported Drug 

Prices 

Although HRSA is responsible for monitoring whether ADAPs obtain the 

best prices available for drugs, it does not routinely compare the drug 

prices ADAPs report to 340B prices. Further, the ADAP drug price 

information that HRSA currently uses to make its comparisons is not 

complete. The reported prices do not reflect the rebates eventually 

received by ADAPs using the 340B rebate option to purchase drugs. 

Without the final ADAP rebate amount on a drug purchase, HRSA cannot 

determine whether the final drug prices paid were at or below the 340B 

price. 

In the report we are releasing today, we are recommending that HRSA, to 

ensure that ADAPs are obtaining the best prices for the drugs they 

provide, require ADAPs to report the final prices they paid for drug 

purchases, net of rebates, and that HRSA routinely determine whether 

these prices are at or below the 340B prices. In commenting on these 

recommendations, HRSA stated that it would like to verify final drug 

prices but this would be labor intensive because reports ADAPs currently 

provide do not contain the needed information. HRSA further stated that it

lacks the resources to conduct a comprehensive price comparison, but is 

making efforts to develop systems to allow ADAPs to check drug prices. 

As we stated in our report, however, while monitoring the prices paid for 

all the drugs on each ADAP’s formulary might be challenging, HRSA could 

compare ADAP reported prices to 340B prices for selected drugs and 

could modify its schedule of ADAP reports to allow for rebate 

reconciliation. 

Page 4 GAO-06-681T 
We found that the 340B program prices were higher for some of the top 

10 drugs than the 340B prime vendor prices and the prices federal 

agencies paid for the same drugs under the federal supply schedule (FSS) 

and federal ceiling price (FCP) drug pricing programs.4

 Using the top 

10 HIV/AIDS drugs by ADAP expenditures, we compared 2003 drug prices 

under the 340B prime vendor, FSS, FCP, and Medicaid programs to the 

340B prices. We found that the FCP and 340B prime vendor prices were 

lower than the 340B prices for 6 of the 7 drugs that had prices available 

under all five programs. The 6 HIV/AIDS drugs were Combivir, Epivir, 

Sustiva, Trizivir, Zerit, and Ziagen. The Medicaid prices,5

 available to state 

Medicaid programs, were consistently higher than the 340B program 

prices and were the highest of all the drug pricing programs for 3 of the 

7 drugs for which we had prices from all programs. The 3 drugs were 

Norvir, Sustiva, and Trizivir. 

340B Prices and Other 

Federal Drug Pricing 

Programs 

Prenatal HIV Testing and 

Perinatal HIV 

Transmission Rates 

When pregnant women are infected with HIV, they can transmit the virus 

to their infants during pregnancy, during labor and delivery, or after 

delivery through breast-feeding. Antiretroviral therapy can reduce the risk 

of HIV transmission from mother to child. According to CDC, the 

prevention of perinatal HIV transmission depends on routine testing of 

pregnant women for HIV and the use of antiretroviral drug treatment and 

obstetrical interventions. All 50 states, the District of Columbia, and 

Puerto Rico have policies or have enacted laws regarding HIV testing of 

pregnant women to help reduce perinatal HIV transmission. The majority 

of states have adopted a policy of voluntary testing of pregnant women 

that is consistent with CDC’s guidelines. We contacted eight states to 

discuss the approach they use to test pregnant women for HIV. The eight 

states we contacted—California, Connecticut, Illinois, Louisiana, 

Michigan, New Jersey, New York, and North Carolina—use two 

approaches. Consistent with additional CDC recommendations on testing, 

three states routinely include HIV tests in a standard battery of prenatal 

testing, but a woman can refuse to be tested for HIV. In the other five 

states, a woman is counseled during prenatal care and must consent to an

 4

The FSS has prices available to all federal government purchasers for the drugs listed on

the schedule. The FCP is the maximum price that drug manufacturers can charge four

agencies—the Department of Defense, the Department of Veterans Affairs, the Public 

Health Service, and the Coast Guard—for the brand-name drugs listed on the FSS, even if 

the FSS prices are higher. The District of Columbia ADAP has access to the FCP. 

5

The Medicaid price is the average amount state Medicaid programs paid net of the basic 

rebate provided under the Medicaid Drug Rebate Program. 

Page 5 GAO-06-681T 
HIV test, usually in writing, before a test can be performed. Of the eight

states that we contacted, three—Connecticut, New Jersey, and New 

York—collect the data needed to determine statewide perinatal HIV 

transmission rates. Six of the eight states we contacted reported that the

number of HIV-positive newborns declined in their state from 1997 to 2002. 

Identifying and Notifying 

Partners of HIV-Infected 

Individuals of Possible HIV 

Exposure 

Research suggests that most new HIV infections originate from HIVinfected persons not yet aware of their infection.6

 This emphasizes the 

need to identify HIV-infected persons and link them with appropriate 

services as soon as possible. The Ryan White CARE Act Amendments of 

1996 provided for states to take action to require a good faith effort be 

made to notify spouses who may have been exposed to HIV. Partner 

counseling and referral services (PCRS) assist HIV-infected persons with 

notifying their partners, including spouses, of their exposure to HIV.7

 We 

contacted 12 states to determine what approaches they use to identify and 

notify partners of HIV-infected individuals.8

 These states use various 

approaches in conducting HIV partner notification activities as part of 

their PCRS programs. These activities include eliciting partner information 

from known HIV-infected individuals—referred to as index cases9

—and 

notifying the partners of their possible exposure to the virus. The states 

use a variety of entities and individuals trained to conduct these activities.

Of the 12 states we contacted, 10 have statutory or regulatory provisions 

that require or permit certain health care entities or workers to notify 

partners, including spouses,10 without the consent of the index case. In the 

 6

G. Marks, N. Crepaz, J. W. Senterfitt, and R. S. Janssen, “United States: Meta-Analysis of 

High-Risk Sexual Behavior in Persons Aware and Unaware They Are Infected with HIV in 

the United States,” Journal of Acquired Immune Deficiency Syndromes, vol. 39, no. 4 

(2005). 

7

CDC’s PCRS guidance for HIV defines PCRS as a prevention activity with the goals of 

(1) providing services to HIV-infected persons and their sex and needle-sharing partners so

they can avoid infection or prevent transmission to others, and (2) helping partners gain 

earlier access to individualized counseling, HIV testing, medical evaluation, treatment, and 

other prevention services. 

8

The 12 states we contacted were California, Connecticut, Florida, Kentucky, 

Massachusetts, Minnesota, Missouri, New York, North Carolina, Pennsylvania, Texas, and

Washington. 

9

Index case is a generic term for a person who has tested positive for HIV and is asked to 

name spouses and partners at the start of the notification process. 

10The North Carolina provision applies only to notification of spouses; state officials told us 

that they generally notify partners with the consent of the index case. 

Page 6 GAO-06-681T 
remaining two states, public health officials or the health department may 

notify partners only with the consent of the HIV-infected individual. The 

participation of HIV index cases in PCRS program activities varies. Not all 

HIV-infected individuals are willing to share the names of their partners 

and not all partners can be reached to be notified.

Some states reported integrating their HIV partner notification activities 

with established programs that are focused on syphilis and other sexually 

transmitted diseases, or STDs. 

Mr. Chairman, this concludes my prepared remarks. I would be happy to 

answer any questions that you or other Members of the Subcommittee 

may have. 

For future contacts regarding this testimony, please contact Marcia Crosse 

at (202) 512-7119 or at crossem@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this testimony. James McClyde, Assistant Director; Robert Copeland;

Helen Desaulniers; Cathy Hamann; Martha Kelly; Daniel Ries; Opal 

Winebrenner; Craig Winslow; and Suzanne Worth made key contributions 

to this statement. 

Contact and 

Acknowledgments 

(290544) Page 7 GAO-06-681T 
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