Santa Clara County Files Lawsuit Against Major Pharmaceutical Companies Over Inflated Pricing in Medicaid Program

Santa Clara County on Wednesday filed a lawsuit against nine major pharmaceutical companies, alleging that they had overcharged county hospitals and other public health agencies for drugs administered through a state discount program, the San Jose Mercury News reports.

The lawsuit was filed in Alameda County Superior Court to avoid potential conflicts of interest. According to the Mercury News, the lawsuit names as defendants:

• AstraZeneca;
  
  
• Aventis;
  
  
• Bayer;
  
  
• Bristol-Myers Squibb;
  
  
• the Glaxo Burroughs Wellcome group;
  
  
• Pfizer;
  
  
• Schering-Plough;
  
  
• TAP Pharmaceutical; and
  
  
• Wyeth-Ayerst Laboratories.

The county alleges that the companies violated a Medicaid drug discount program that is part of the 1992 Public Health Service Act. The program is a condition for participation in Medicaid, and it requires pharmaceutical companies to give county hospitals and health clinics discounts on outpatient over-the-counter and prescription medicines. The discounts typically are 20% to 35%, the Mercury News reports.

The lawsuit also alleges that the companies violated California false-claims and unfair-competition laws.

The amount that Santa Clara County was allegedly overcharged is not known. The county spent more than $30 million in 2004 and $31 million so far in 2005 on drugs under the discount program. The lawsuit seeks access to the companies' drug-pricing information, as well as reimbursement for any ill-gotten profit and other damages.

The "core allegations" are based on reports issued in 2003 and 2004 by the federal Office of Inspector General, which concluded that pharmaceutical companies overcharged health care providers. One of the reports was later withdrawn by OIG after industry officials questioned its underlying data.

County Counsel Ann Miller Ravel said, "We have no way of knowing whether the prices we have been paying are fair."

Representatives for the pharmaceutical companies either declined to comment or said they could not comment because they had not reviewed the lawsuit (Woolfolk, San Jose Mercury News, 8/18).