Illinois Sues 48 Drug Companies

February 8, 2005

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Illinois Attorney General Lisa Madigan has filed a lawsuit against 48 pharmaceutical companies alleging that for more than a decade, the drug makers fraudulently published inflated prices for prescription drugs -– forcing government programs and Illinois Medicare consumers to overpay hundreds of millions in drug costs.

At least 19 other states have brought similar actions against major drug companies, most recently Alabama, which sued 79 drug companies last week.

Reimbursements by state and federal government health insurance programs to providers such as doctors, pharmacies and hospitals are based on prices the drug companies themselves report to publications to be used as benchmarks. However, the drug companies allow the providers to buy drugs at a cost substantially less than what the states or consumers are paying based on the published drug prices.

The difference between the published benchmark price, known as the average wholesale price (AWP), and the amount that providers pay is called a spread. The bigger the spread, the more money providers are able to pocket for themselves.

According to Madigan’s complaint, providers – seeking bigger profits for themselves – tend to prescribe and sell the drug with the largest spread – and the most kickback for themselves. This practice results in state Medicaid programs and Medicare participants who must pay co-pays being gouged even as providers and drug companies rake in billions.

“Drug companies have manipulated the average wholesale prices and used these prices to overcharge state and federal government programs, taxpayers and Medicare consumers,” Madigan said. “We allege that this scheme is deceptive and illegal and has cost the state government and Medicare consumers millions of dollars.”

As an example of how the scheme has cost the state and Medicare consumers, Madigan noted that Dey’s Albuterol Sulfate 5 mg/ml solution, 20 ml, had an AWP of $14.99 in 2000. However, it could be purchased for $4.05, which resulted in a spread of 270 percent, causing the state’s Medicaid program and Medicare participants who must pay a co-pay to pay excessive prices for the Albuterol, an asthma medication.

More than 650,000 children and adults in metropolitan Chicago have asthma, according to the American Lung Association of Metropolitan Chicago.

“It is likely that Illinois’ Medicaid program has overpaid for Albuterol on behalf of the many Illinoisans who suffer from asthma and take this drug,” Madigan said. “It is also likely that a number of Medicare recipients who must pay co-pays have been overcharged for this drug. This suit seeks to recover for these overpayments.”

Madigan also noted that in one class action complaint in Massachusetts, Baxter was alleged to have an AWP for its sodium chloride of $928.51. The U.S. Department of Justice (DOJ) determined that the actual AWP for Baxter’s sodium chloride solution was $1.71. The difference was $926.80 and the percentage spread was 54,199 percent.

As of December 2004, approximately 1.8 million Illinois citizens, or 14 percent of the state’s population, were enrolled in the state’s Medicaid programs. The state pays all prescription drug costs for Medicaid patients. In addition, Illinois’ senior citizens and residents with disabilities who participate in the Medicare program have paid substantially higher prices for their prescription drug co-payments.

In addition to the allegations about the AWP scheme, Madigan’s lawsuit also alleges that to conceal the true prices, the drug manufacturers have given secret discounts and rebates to providers and have used various other devices including marketing schemes and confidentiality agreements.

Madigan’s suit charges 48 pharmaceutical companies with multiple violations of Illinois’ Consumer Fraud and Deceptive Business Practices Act, Public Assistance Fraud Act and Whistleblower Reward and Protection Act.

Madigan’s lawsuit asks the court to award millions of dollars in restitution and actual damages to the State of Illinois and its Medicare participants for all excessive prescription drug payments and co-payments made as a result of the defendants’ fraudulent conduct.

The lawsuit also asks the court to order the defendants to pay all court costs, as well as civil penalties of $50,000 per violation found to have been committed with the intent to defraud and additional penalties of $10,000 per violation found to be committed against a person 65 years of age or older. Finally, Madigan’s lawsuit seeks to prohibit the defendants from further engaging in this conduct.

In addition to Illinois, approximately 19 other states have sued drug companies in similar actions.

Madigan’s lawsuit names as defendants:

1. Abbott Laboratories
2. Alpharma, Inc.
3. Alpha Therapeutic Corp.
4. Amgen, Inc.
5. Astrazeneca Pharmaceuticals, LP
6. Astrazeneca, LP
7. Aventis Pharmaceuticals, Inc.
8. Aventis Behring, LLC n/k/a ZLB Behring
9. B. Braun of America, Inc.
10. Barr Pharmaceuticals, Inc.
11. Baxter International, Inc.
12. Bayer Corp.
13. Ben Venue Laboratories, Inc.
14. Boehringer Ingelheim Corp.
15. Boehringer Ingelheim Pharmaceuticals, Inc.
16. Bristol-Myers Squibb Co.
17. Chiron Corp.
18. Dey, Inc.
19. Elkins-Sinn, Inc.
20. Forest Laboratories, Inc.
21. Immunex Corp.
22. Ivax Corp.
23. Ivax Pharmaceuticals, Inc.
24. Janssen Pharmaceutical Products, LP
25. Johnson & Johnson
26. McGaw, Inc.
27. McNeil-PPC, Inc.
28. Merck & Co., Inc.
29. Mylan Laboratories, Inc.
30. Mylan Pharmaceuticals, Inc.
31. Novopharm USA, Inc.
32. Novartis Pharmaceuticals Corp.
33. Ortho Biotech Products, LP
34. Ortho-McNeil Pharmaceuticals, Inc.
35. Par Pharmaceutical Cos., Inc.
36. Pfizer, Inc.
37. Pharmacia Corp.
38. Purepac Pharmaceutical Co.
39. Roxane Laboratories, Inc.
40. Sandoz, Inc., f/k/a Geneva Pharmaceuticals, Inc.
41. Schering-Plough Corp.
42. Smithkline Beecham Corp., d/b/a GlaxoKlineSmith
43. Sicor Pharmaceuticals, Inc., f/k/a Gensia Sicor Pharmaceuticals, Inc.
44. Tap Pharmaceutical Products, Inc.
45. Teva Pharmaceuticals USA, Inc.
46. Warrick Pharmaceutical Industries, Ltd.
47. Watson Pharma, Inc., f/k/a Schein Pharmaceuticals, Inc.
48. Watson Pharmaceuticals, Inc.

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