Attorney General alleges that pharmaceutical companies inflated drug prices, resulting in millions of dollars in increased Medicaid reimbursement costs paid by taxpayers
November 17, 2008 -- Attorney General Steve Six sued seventeen drug companies today, alleging they unlawfully inflated drug costs paid by Kansas taxpayers through the Medicaid program. Six filed similar suits against thirteen other drug companies three weeks earlier.
The lawsuit alleges that the pharmaceutical companies deliberately misreported drug price information in order to increase reimbursements made by the Kansas Medicaid program. Medicaid is the state-federal health care program for the poor.
"We believe Kansas has lost millions of dollars as a result of these drug companies' fraudulent pricing schemes," Six said.
"We allege that the drug manufacturers deliberately inflated the reported Average Wholesale Price-or AWP-and other wholesale prices for their drugs in order to increase market share for their products," he said. "This is a disturbing abuse of the Medicaid reimbursement system."
Six said the fraudulent pricing and marketing of prescriptions to the Medicaid program has impacted Kansas taxpayers by causing the Kansas Medicaid program to grossly over-pay for prescriptions.
"Because of these drug companies' inaccurate pricing, the Kansas's Medicaid program has spent millions of dollars more for prescription drugs than it should have," Six said. "The companies' false price reporting is all the more offensive because it undercuts Medicaid, the publicly-funded health program created to assist those who are among our state's most vulnerable citizens."
According to Kansas's lawsuit, the Kansas Medicaid Program spent over $160 million on prescriptions drugs in the past year alone. The lawsuit alleges that the price for a drug paid by the state, based on a fraudulently-reported Average Wholesale Price (AWP) and other price indicators, often bears no relationship to the true price and can exceed 100%, 200% or even more of the true price.
The difference between the reimbursement amount and the acquisition cost is the "spread." Six explained that one of the reasons drug companies report false and inflated AWPs and other wholesale prices is to create a "spread" between the reimbursement amount Medicaid pays (which is based on these reported prices) and the actual acquisition cost the pharmacy-provider pays to obtain the drug. The suit alleges that the defendant companies encourage Medicaid providers (and others in the private sector) to buy or give preferential treatment to their products based on the size of this "spread"-increasing the drug companies' market share.
For example, Amgen/Immunex reported an AWP of $137.94 for their drug Leucovorin Calcium, yet they sold the same drug to retail pharmacists for $14.58-a "spread" of 846%.
In another example, Siscor (of Ivax Corp.) reported an AWP of $342.19 for Tobramycin Sulfate, yet it was determined that the actual price was $6.98-a "spread" of 4,802%.
Six said that other states have brought similar lawsuits. The federal government has also been investigating drug manufacturer pricing practices.
Kansas's Complaints were filed in Wyandotte County District Court. It accuses the defendants of violating the federal Medicaid statute, breach of contract, violating the Kansas Consumer Protection Act, fraud, and unjust enrichment. The suit asks the court to permanently prohibit the alleged illegal practices, and it seeks recovery of damages, penalties, and costs.
The state is being represented in this matter by the Kansas law firm of Bartimus, Frickleton, Robertson & Gorny, P.C. and the Alabama firm of Beasley Allen. They were selected in consultation with the legislature after a competitive bidding process.
The Defendants are: Ivax Pharmaceuticals, Bayer Pharmaceutical Corporation, Eli Lilly, AMGEN/IMMUNEX Corporation, Fujisawa Healthcare, Inc., Sanofi-Aventis, Inc., Shire Pharmaceutical, Genzyme, Otsuka America, Sepracor, HLR, B. Braun, Watson, MedImmune, Novartis, Genetech, and Organon.