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KEYCODE BAYER #153

August 5, 2004

Bayer, Merck: NYC Files Lawsuit Against 44 Drug Makers

New York City officials filed a lawsuit in federal court late Wednesday against 44 drug makers, claiming they overcharged Medicaid for prescription drugs.

The suit filed in the Southern District of New York names some of the largest makers of prescription medications, including Aventis Pharmaceuticals Inc., Bristol-Myers Squibb Co., Bayer, Eli Lilly and Co., Johnson & Johnson, Merck & Co. Inc., Schering-Plough Corp. and Wyeth.

"Aventis believes it has complied fully with the laws and regulations governing the Medicare and Medicaid systems," Aventis spokeswoman Christine Kirby said.
Spokesmen at several other drug makers declined to comment Thursday, saying they hadn't yet seen the lawsuit.

The city's action comes as the business practices of drug makers and pharmacy-benefits plan managers come under greater scrutiny by public officials.

On Wednesday, New York Attorney General Eliot Spitzer and the New York State Civil Service Commission filed a breach-of-contract lawsuit in state court alleging that Express Scripts Inc., one of the nation's largest pharmacy-benefit managers, inflated by millions of dollars the cost of prescription drugs for New York state employees.

Last week, Schering-Plough agreed to pay $345 million and one of its sales and marketing units agreed to plead guilty to criminal charges to resolve allegations by the U.S. Department of Justice that it defrauded Medicaid in relation to its pricing of Claritin, an allergy medication.

Attorneys general in Massachusetts, Florida and Pennsylvania also have pursued legal action against drug makers in the past year, charging the industry has inflated prices.

In its lawsuit, New York City claims drug makers inflated the average wholesale price and best price for drugs - two key components Medicaid uses in determining how much to pay for prescriptions. The city also claims that drug makers failed to pay proper rebates to its Medicaid program.

As a result, the city's program, which pays 25 percent of Medicaid costs to its residents under a formula prescribed by the federal government, was overcharged "many millions of dollars," according to court documents. Under the Medicaid formula, the state of New York pays 25 percent of drug costs and the federal government pays the remaining 50 percent.