Iowa sues 78 drug companies
Claims they
inflated Medicaid
drug prices
By Charlotte Eby Journal Des Moines Bureau | Posted: Wednesday, October 10, 2007
DES MOINES -- Iowa Attorney General Tom Miller announced Tuesday the state has filed a lawsuit against 78 pharmaceutical companies, alleging the companies inflated drug prices for Medicaid patients, costing the state millions of dollars over several years.
Iowa follows the lead of several others that have filed similar lawsuits seeking to recover money they say was overpaid to drug companies. Texas has recovered more than $55 million so far, Miller said.
"It makes me angry that Iowa taxpayers are forced to pay more to finance record drug industry profits because the defendant drug companies do not honor their obligations under law to deal honestly with the government," Miller said.
Iowa's Medicaid program, which provides health care to low-income Iowans, spent more than $1.6 billion for drugs from the companies during 1992 to 2005, the time covered by the lawsuit.
Miller said he doesn't know how much money the state might have overpaid for the drugs.
But Miller said the price of drugs paid by Iowa, which is based on an average wholesale price reported by the companies, ended up being far more than the amount they were sold to retail pharmacists.
For example, Miller said GlaxoSmithKline reported an average wholesale price of $39.90 for Zantac but sold the same drug to retail pharmacists for $9.80.
Another example cited was the price for alprazolam, sold under the name Xanax. Miller alleges Pfizer reported an average wholesale price of $169.36 for the drug but sold to retail pharmacists for $10.10.
"These are somewhat extreme examples, but they give you the idea that the price reported was not the price that should have been reported," Miller said.
Chris Loder, a spokesman for Pfizer, said the company believes the kind of allegations made by the state are misplaced and without legal merit. He said the average wholesale price has been used for decades as a benchmark for reimbursement.
"The state of Iowa is well aware that the average wholesale price does not reflect the lowest price available for medicine or the actual acquisition cost by which a pharmacy can obtain the medicine, and it now pretends to have no such knowledge," Loder said. "The state legislatures, not the courts, are the proper forum for addressing these types of reimbursement issues."
Representatives for GlaxoSmithKline could not be reached for comment.
Miller said pharmacists also ended up benefiting financially from the inflated prices for Medicaid drugs in the scheme. He alleges the drug companies tried to increase the "spread" in the acquisition cost and reimbursement rate to push sales for their products.
Miller said the pharmacists are not named in the lawsuit because the false prices were reported by the pharmaceutical companies, among other reasons.
The 167-page complaint, filed in U.S. District Court in the Southern District of Iowa, accuses the companies of violating the federal Medicaid statute, breach of contract, violating the Iowa Consumer Fraud Act, fraud and unjust enrichment.
Miller said the case likely will be consolidated with other similar state lawsuits pending in federal court.
Iowa has hired a private law firm from New York to represent the state in the case because of their expertise in the area.
Charlotte Eby can be reached at (515) 243-0138 or chareby@aol.com
Iowa follows the lead of several others that have filed similar lawsuits seeking to recover money they say was overpaid to drug companies. Texas has recovered more than $55 million so far, Miller said.
"It makes me angry that Iowa taxpayers are forced to pay more to finance record drug industry profits because the defendant drug companies do not honor their obligations under law to deal honestly with the government," Miller said.
Iowa's Medicaid program, which provides health care to low-income Iowans, spent more than $1.6 billion for drugs from the companies during 1992 to 2005, the time covered by the lawsuit.
Miller said he doesn't know how much money the state might have overpaid for the drugs.
But Miller said the price of drugs paid by Iowa, which is based on an average wholesale price reported by the companies, ended up being far more than the amount they were sold to retail pharmacists.
For example, Miller said GlaxoSmithKline reported an average wholesale price of $39.90 for Zantac but sold the same drug to retail pharmacists for $9.80.
Another example cited was the price for alprazolam, sold under the name Xanax. Miller alleges Pfizer reported an average wholesale price of $169.36 for the drug but sold to retail pharmacists for $10.10.
"These are somewhat extreme examples, but they give you the idea that the price reported was not the price that should have been reported," Miller said.
Chris Loder, a spokesman for Pfizer, said the company believes the kind of allegations made by the state are misplaced and without legal merit. He said the average wholesale price has been used for decades as a benchmark for reimbursement.
"The state of Iowa is well aware that the average wholesale price does not reflect the lowest price available for medicine or the actual acquisition cost by which a pharmacy can obtain the medicine, and it now pretends to have no such knowledge," Loder said. "The state legislatures, not the courts, are the proper forum for addressing these types of reimbursement issues."
Representatives for GlaxoSmithKline could not be reached for comment.
Miller said pharmacists also ended up benefiting financially from the inflated prices for Medicaid drugs in the scheme. He alleges the drug companies tried to increase the "spread" in the acquisition cost and reimbursement rate to push sales for their products.
Miller said the pharmacists are not named in the lawsuit because the false prices were reported by the pharmaceutical companies, among other reasons.
The 167-page complaint, filed in U.S. District Court in the Southern District of Iowa, accuses the companies of violating the federal Medicaid statute, breach of contract, violating the Iowa Consumer Fraud Act, fraud and unjust enrichment.
Miller said the case likely will be consolidated with other similar state lawsuits pending in federal court.
Iowa has hired a private law firm from New York to represent the state in the case because of their expertise in the area.
Charlotte Eby can be reached at (515) 243-0138 or chareby@aol.com
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Dick wrote on Oct 14, 2007 11:36 AM: