Montana accuses drug makers of illegally inflating prices
Montana's attorney general sued 18 major drug companies Monday, accusing them of an illegal scheme that inflated prices and cost the state and consumers tens of millions of dollars.
By exaggerating the wholesale prices of some drugs, the companies guaranteed large buying groups that purchase drugs for hospitals and clinics receive windfalls when reimbursed by government health care programs, said Attorney General Mike McGrath.
The 45-page complaint, filed in state District Court here, said that financial incentive to buyers increased companies' drug sales.
"Montana taxpayers have been cheated out of millions of dollars because they have paid this inflated average wholesale price," he said.
The scheme hurt taxpayers because they finance the Medicaid and Medicare programs that were forced to pay the exaggerated drug prices for patients covered by the government health care programs, McGrath said.
Consumers also lost money because their co-payments for prescription drugs were higher than they should have been, he added. In some cases, even 20 percent co-payments exceeded the true cost of medicines, McGrath said.
Companies named in the suit could not immediately be reached Monday, or did not return phone calls seeking comment.
The lawsuit names Abbott Laboratories Inc., American Home Products Corp., Amgen Inc., AstraZeneca, Aventis Pharma, Baxter Pharmaceutical Products Inc., Bristol-Myers Squibb Co., Chiron, Dey Inc., Eli Lilly and Co., GlaxoSmithKline Corp., Hoechst Marion Roussel Inc., Immunex Corp., Pharmacia Corp., Pharmacia and Upjohn Co., Schering-Plough Corp., SmithKline Beecham Corp., and Warrick Pharmaceuticals Corp.
The suit charges that the drug makers engaged in unfair and deceptive trade practices, Medicaid fraud and racketeering.
Montana's suit mirrors one filed by the state of Nevada on Jan. 17 and a suit filed in December by a coalition of 15 consumer groups against 28 pharmaceutical companies.
The lawsuits are partly based on findings from an investigation of drug makers by the U.S. Justice Department, U.S. Department of Health and Human Services and Congress.
The complaints focus on what the industry calls the average wholesale price, or AWP. That price, set by the drug companies without any verification, determines how much drug suppliers are reimbursed by Medicare and Medicaid.
"As a result of the fraudulent and illegal manipulation of AWP for certain drugs by the defendant pharmaceutical manufacturers, they and the other manufacturers have reaped tens of millions of dollars in illegal profits at the expense of American government payors and consumers," McGrath said in the suit.
The elderly on Medicare have been particularly hard hit because their co-payments for prescriptions are based on the bogus AWP charges, he said.
The goal of the companies' pricing scheme was to boost sales of their drugs, according to the complaint. Because AWPs reported by the drug makers are much higher than the prices paid for the medicines, those providing the drugs to hospitals and clinics got a financial windfall when reimbursed by Medicare and Medicaid.
The suit also said the pricing practices have had a dangerous effect of influencing physicians' decisions on which drugs to prescribe. Most of the medicines involved in the pricing scheme are cancer-treatment drugs, McGrath said.
The suit asks for unspecified restitution for losses to Montanans and the state, and for damages to punish the drug makers for their actions. It seeks fines of $2,000 for every false claim made by the manufacturers and for a court order requiring that future AWPs accurately reflect the wholesale prices paid by physicians and pharmacies.
He said he has no estimate of overcharges by the companies operating in Montana or what possible damages may be. But he noted that a recent report by federal General Accounting Office said such pricing practices resulted in $532 million in Medicare overpayments nationwide during 2000.
McGrath said he has talked to his counterparts elsewhere and other states may file similar suits of their own.
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