Lockyer Adds 39 Pharmaceutical Companies To Alleged Overcharging Case
As expected, Attorney General Bill Lockyer (D) on Thursday filed suit against 39 pharmaceutical companies, alleging that the companies overcharged the state's Medicaid program by hundreds of millions of dollars, the New York Times reports. Thursday's legal filing -- which names Amgen, Baxter Healthcare, Bristol-Myers Squibb, GlaxoSmithKline, Mylan Laboratories, Novartis, Schering-Plough and other companies -- is an amendment to a 2003 suit filed against Abbott Laboratories and Wyeth Pharmaceuticals (Broder, New York Times, 8/26). Lockyer said Wyeth has since resolved the case (AP/Washington Post, 8/26).
The lawsuit is one of 17 civil action suits filed by states accusing the pharmaceutical industry of systematic price inflation (Schmit, USA Today, 8/26). The state suits have been consolidated in federal court in Boston (Loftus, Wall Street Journal, 8/26). The federal lawsuit, which includes the new complaints from Lockyer, stems from a whistleblower suit filed in 1998 by a Florida pharmacist. John Lockwood, the pharmacist, "noticed wide discrepancies in prices charged by drug manufacturers," the New York Times reports. California joined the lawsuit in 2003 (New York Times, 8/26).
Although the lawsuits have been consolidated, Lockyer said the federal court could return the case to each individual state (Benson, Sacramento Bee, 8/26).
Lockwood said he filed the lawsuit after it "became clear to us certain manufacturers were creating huge differentials on their products as an inducement to pharmacies, doctors and others to purchase their drugs over another" (Lucas, San Francisco Chronicle, 8/26).
In California's complaint, Lockyer claims that the drug companies inflated the average wholesale price of many drugs, thereby creating large discrepancies between the cost paid by care providers and the reimbursement rates they received from Medi-Cal. California law requires that Medi-Cal reimbursements be based on AWP (AP/Washington Post, 8/26). Lockyer said the companies charged Medi-Cal as much as 10 times more for some drugs as they charged other groups, such as pharmacies and hospitals (New York Times, 8/26).
Lockyer said the added expense was further inflated because health care providers had financial incentives to prescribe drugs with the increased prices. Lockyer said the state estimated that each company could be liable for as much as $40 million (AP/Washington Post, 8/26). California's suit accuses the companies of violating the state's False Claims Act, which provides up to three times the cost of damages and penalties of up to $10,000 per false claim (Wall Street Journal, 8/26). Medi-Cal spends about $3.5 billion a year on prescription drugs, accounting for about 10% of its $34 billion budget, Lockyer said (AP/Washington Post, 8/26).
Lockyer said, "We're dragging these companies into the court of law because they're gouging the public on basic life necessities" (Bloomberg/Los Angeles Times, 8/26). Lockyer acknowledged that Medi-Cal should have been more careful about drug prices in the past, but he said that drug companies should still be held liable.
"I wish there had been more aggressive negotiations along the way," Lockyer said, adding, "Now we have to clean up after the elephant" (New York Times, 8/26). Lockyer said, "A lot of people along the chain of distribution may have taken a share of these obscene profits, but clearly it was a scheme hatched by the pharmaceutical companies" (San Francisco Chronicle, 8/26).
Elizabeth Hoff, a spokesperson for Abbott, said, "Abbott has consistently complied with all laws and regulations, and we intend to vigorously defend ourselves against these claims" (Folmar, San Jose Mercury News, 8/26).
Brian Henry, a spokesperson for Bristol-Myers, said, "We are in full compliance with the law, guidelines and contracts" (San Francisco Chronicle, 8/26).
Mary Anne Rhyne, a spokesperson for the American subsidiary of GSK, said, "We follow the law, and we follow government guidelines," adding, "They are fully aware that the government bases payment on the average wholesale price, which represents one of several starting points for negotiation of a reimbursement" (New York Times, 8/26).
A spokesperson for Schering-Plough said the company had not seen the complaint and declined to comment.
Mary Klem, a spokesperson for Amgen, said the company was included in the suit because of claims filed against Immunex, a subsidiary, before Amgen took it over (AP/Washington Post, 8/26).