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KEYCODE BAYER #132

March 11, 2004

Pennsylvania sues 13 drug firms on prices

Bayer, Pfizer, Aventis: Deceptive Pricing and Sales Practices

Pennsylvania's attorney general sued 13 pharmaceutical companies yesterday, accusing them of using deceptive pricing and sales practices in a scheme to inflate the cost of medicines for more than a decade. The 42-page lawsuit, filed in Commonwealth Court, claims drugmakers provided improper incentives to doctors to choose their drugs and then inflated the "average wholesale prices" to force consumers and state agencies to pay significantly higher prices. The practices, which have been ongoing since 1991, hurt consumers as well as state-administered programs, such as Medicaid, because they must pay higher prices for medicines, the suit says.

"This scheme cost our citizens and the Commonwealth hundreds of millions of dollars in overcharges for prescription drugs," said Attorney General Jerry Pappert at a news conference in Harrisburg. Pennsylvania joins about a dozen other states that have filed lawsuits seeking to lower prices that drugmakers charge state and government-run programs. Spending for prescription drugs is increasing 16 percent a year and is one of the fastest-growing costs of health care, according to the Henry J. Kaiser Family Foundation. Yesterday's lawsuit seeks an injunction to stop the industry conduct; the return of hundreds of millions of dollars to consumers and the state; and the payment of civil fines, unspecified punitive damages, and legal fees, Pappert said.

The 13 drugmakers named as defendants in the lawsuit are: AstraZeneca Pharmaceuticals L.P., Amgen Inc., Aventis Pharmaceuticals Inc., Bayer AG, Baxter International Inc., Bristol-Myers Squibb, Boehringer Ingelheim Corp., Dey Inc., GlaxoSmithKline P.L.C., Johnson & Johnson, Pfizer Inc., Schering-Plough Corp. and Tap Pharmaceutical Products Inc.

The lawsuit accuses the drug companies of four improper actions:

Establishing and promoting "spreads" between the discounted amounts they charge doctors for drugs and the higher price those health-care providers charge consumers and the government.

Giving free samples to doctors, even though the companies know "that medical providers will bill consumers and the state for the products."

Offering free trips, cash, consulting opportunities, seminars, meals and gifts to doctors and health-care providers in return for choosing and promoting sales of their products.

Concealing their methods of setting "average wholesale prices" to prevent the state and consumers "from knowing the actual price paid by medical providers for the prescription drugs." Federal and state governments pay for prescription drugs based on a price set by the drug companies. The suit says drug companies intentionally inflate those prices.

Similar lawsuits alleging price inflation by the pharmaceutical industry have been filed by state attorneys general in Ohio, Connecticut, New York, Texas and Montana. The Pennsylvania suit alleges that seven of the drug companies have pleaded guilty to, or settled federal criminal charges of, unlawful marketing and sales practices, and paid fines and penalties that have returned "billions of dollars to the federal Treasury."

Pennsylvania has been only "partially compensated" by prior federal settlements in the state Medicaid program. The suit seeks "full restitution to Pennsylvania consumers" for all drug overpayments for both Medicaid and non-Medicaid prescription drugs. State programs that buy drugs include Medicaid, the Pharmaceutical Assistance Contract for the Elderly (PACE), and Pennsylvania Employees Benefit Trust Fund.

Pappert said Pennsylvania's lawsuit was "broader and with more defendants" than similar suits in other states. "I am seeking recovery, not just for Medicaid, but for all affected Commonwealth programs," he said. "I am also seeking recovery for individual consumers in Pennsylvania who paid higher prices for their drugs. I am trying to recover for every entity and consumer possible."

Pappert said the number of consumers who had been affected was unknown and would be determined as the lawsuit proceeded "from Commonwealth drug utilization data and from administrators of the affected programs." "One important point here: This also affects seniors who participated in the Medicare programs who have 20 percent co-pays for their drugs," Pappert said. "They are paying 20 percent of an inflated price."

On Tuesday, the Ohio attorney general made similar allegations against five drug manufacturers accused in a suit of concealing the actual cost of prescription drugs by manipulating the average wholesale price. A similar class-action lawsuit is pending in federal court in Boston against 21 drug manufacturers accused of overstating their average wholesale prices and of conspiring with pharmacy-benefit managers to maintain the spread between the average whole prices and actual discounted prices.

The Prescription Access Litigation Project, a Boston-based advocacy group, also alleges in that suit that drugmakers participating in the Together Rx discount card program for Medicare beneficiaries raised average wholesale prices in order to pay for program discounts.

AstraZeneca Pharmaceuticals pleaded guilty in June to violating a federal drug-marketing law and agreed to pay $354.9 million to settle civil and criminal charges. This involved giving free samples of its prostate cancer drug Zoladex to cancer specialists and urologists who then billed Medicare, Medicaid and federally funded programs for reimbursement. In October 2001, Tap Pharmaceuticals, whose prostate cancer drug Lupron competed with Zoladex, pleaded guilty in federal court in Boston in a case similar to the AstraZeneca charges. Tap paid the federal government $875 million in fines and civil penalties.

by Linda Loyd, The Philadelphia Inquirer