[Ip-health] Conecticut sues 7 drug companes for price gouging

[Mike Palmedo]

http://www.ctnow.com/news/local/hc-drugs0314.artmar14,0,2572024.story?coll=hc-headlines-local

State Sues Drug Companies, Claiming Price Gouging
March 14, 2003
By WILLIAM HATHAWAY, Courant Staff Writer

Seven drug manufacturers have bilked patients and state drug programs of
tens of millions of dollars in a complicated price-gouging scheme, the
state attorney general and consumer protection commissioner charged
Thursday.

"These companies raided state coffers and patients' pockets," said
Attorney General Richard Blumenthal. "The victims were people paying for
vitally needed medicine."

The Department of Social Services, which pays most of the $600 million
Connecticut spends annually on pharmaceuticals, joined lawsuits that
seek reimbursement of overcharges to state agencies and patients.

The companies allegedly inflated the costs of some drugs - chiefly those
used for cancer treatments and respiratory problems - that are
reimbursable under several state programs. The companies in turn sold
the drugs at deep discounts to providers such as pharmacies or doctors,
who were allowed to keep the difference between the reimbursement amount
and the discount cost as an inducement to prescribe and sell the drugs.

In essence, the companies used state funds to help increase the market
share of their drugs, the suits allege.

"It's an absolute disgrace on the part of these companies," said
Consumer Protection Commissioner James T. Fleming.

The defendants in lawsuits being filed at Hartford Superior Court are
Schering-Plough Corp., GlaxoSmithKline, Aventis, Dey Inc., Warrick
Pharmaceuticals, Pharmacia Corp and Roxanne Pharmaceuticals, a division
of Boehringer Ingelheim, which is based in Ridgefield.

Under state drug programs, the state reimburses drug manufacturers for
drugs based on their average wholesale price, minus 12 percent. However,
drug companies report the costs themselves to national databases and
state officials have no way of corroborating them, according to Michael
P. Starkowski, deputy commissioner at DSS.

As an example, a drug company might report a price of $100 for a drug
that actually costs $20, state officials said. The reimbursement paid by
the state would then be $88. Drug companies then offer the difference
between the actual cost and the government reimbursement - a "spread" of
$68 in this example - as an inducement to help market the drug.

Among the drugs "overcharged" to the state in this manner were the
asthma drug Albuterol and chemotherapy drugs Zofran and Anzemet,
according to officials.

"In some cases, the companies actually market the spread to doctors,"
Blumenthal said. "The practice is industrywide."

Four or five other states have initiated similar actions against a
number of different drug manufacturers, Blumenthal said.

Bruce Lott, senior director of public affairs for the Pharmaceutical
Manufacturers Association declined to comment, saying the association
does not comment on business practices of individual members.

"We haven't seen the complaint," said Pamela DeMala, spokeswoman for
Boehringer Ingelheim. "But Roxanne markets its products in full
compliance with the law and we are confident in our business practices."

State officials said the practice hurts all consumers, but particularly
those on Medicare, who pay 20 percent of the cost of some cancer
treatments as a co-payment.

State officials are still trying to calculate the total amount
overcharged, but initially will seek a $15 million reimbursement to the
state and possibly a similar amount for consumers.



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Mike Palmedo
Consumer Project on Technology
T-202-387-8030
F-202-234-5176
mpalmedo@cptech.org