Consumer Groups Sue Rx Drug Companies Over Alleged Price Manipulation
The Prescription Access Litigation project, a consumer coalition based in Boston, has sued 28 pharmaceutical companies, alleging that they manipulate Medicare drug prices by selling doctors "deeply discounted" medications while encouraging the physicians to bill the government at full price, the Boston Globe reports. Medicare does not cover most prescription drugs but does pay for a few medications administered by physicians and other providers, such as cancer therapies. Spending for these drugs is based on so-called "average wholesale prices" -- reports by drug makers to the government of how much a product sells for in the retail market. Pharmaceutical companies are then required to sell the product to Medicare at 95% of the AWP, and Medicare beneficiaries generally pay 20% of the cost. According to PAL project attorneys Thomas Sobol and Stephen Rosenfeld, however, the AWP is often "inflated" as drug companies seek to gain market share by offering physicians discounts, usually of between 13% to 34% but sometimes as high as 85%. The companies then allegedly encourage physicians to bill the government at the higher AWP, allowing doctors to make a profit. The attorneys also said drug makers often give rebates to doctors and encourage them to bill Medicare for free samples (Kowalczyk, Boston Globe, 12/21). Since none of the discounts are passed on to Medicare or its beneficiaries, the suit alleges Medicare and individual consumers were overcharged by more than $800 million in 2000. According to the Las Vegas Sun, the defendants are "most of the major drug companies," including Bristol-Myers Squibb, GlaxoSmithKline, Schering-Plough Corp. and Eli Lilly and Co. (Las Vegas Sun, 12/20).
Although federal and state officials have launched investigations into average wholesale drug pricing in recent years, the suit represents the "first time consumer groups have banded together to sue pharmaceutical firms," the Globe reports (Boston Globe, 12/21). In October, TAP Pharmaceutical Products Inc., a joint venture of Abbott Laboratories and Takeda Chemical Industries, settled a Medicare and Medicaid fraud case for $875 million, the largest criminal fine ever levied by the government for health care fraud. Prosecutors alleged that TAP "artificially inflated" the AWP of the company's prostate cancer drug Lupron to "increase sales and profits." Still, Sobol said past official inquiries into drug pricing have produced "little action," leading the groups he represents to try to "force changes" through a lawsuit (Boston Globe, 12/21). "This practice affects a particularly vulnerable population and it is clearly a systematic practice in the industry that needs to be addressed," Sobol said. A spokesperson for the Pharmaceutical Research and Manufacturers of America offered no comment on the litigation (Las Vegas Sun, 12/20).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.