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Feds, States Challenge Drug Companies Over Generic Policies

CVS Caremark agrees to pay $36 million in ranitidine dispute

By Mark Huffman
ConsumerAffairs.com

March 18, 2008
CVS Caremark Corporation has agreed to a settlement with the U.S. Department of Justice and a number of state Attorneys General to resolve an investigation into its dispensing of the drug ranitidine to Medicaid patients. The settlement calls for payment by the Company of $36.7 million, plus approximately $800,000 in investigative costs and other fees.

Meanwhile, a number of states have sued Abbott Laboratories and Fournier, a French drug company, claiming they conspired to keep the generic drug TriCor at a high price.

In the CVS case, the federal and state agencies sued the drug retailer over its practice of dispensing the generic drug ranitidine in more expensive capsule form rather than tablets. In agreeing to the settlement, Caremark has expressly denied engaging in any wrongful conduct.

In defending itself, the company said it purchased and stocked the capsule form of ranitidine across its chain of retail stores for dispensing to all patients, not just Medicaid recipients, due to the fact that the acquisition cost of capsules was lower than the cost of tablets.

At various times, certain state Medicaid programs reimbursed pharmacies at a higher rate for capsules than for tablets. Both of these dosage forms for ranitidine contain the same active ingredients. The government alleged that the practice of dispensing capsules instead of tablets was motivated by a desire to increase Medicaid reimbursement. The company denied the allegation.

In the TriCor case, 18 states and the District of Columbia charge that two drug companies conspired to prevent and delay the market availability of the cheaper generic version of the cholesterol drug.

"Prices usually drop when generic drugs come into the market and compete with brand-name drugs," said Iowa Attorney General Tom Miller. "Generic drugs often cost 50-80 percent less than branded drugs. We allege the companies conspired to implement an anti-generic-drug strategy."

$1 Billion in Sales

TriCor is used to reduce high levels of triglycerides and cholesterol, and it accounted for over one billion dollars of Abbott's sales last year, according to court documents. Abbott is the American partner of Fournier, and they jointly developed and marketed TriCor. Abbott began marketing TriCor in 1998.

According to the multi-state lawsuit, the attempt to block a cheaper generic drug of TriCor started when generic drug companies began developing their own versions of TriCor. The suit alleges that Abbott and Fournier brought a series of groundless patent-infringement lawsuits against the generic companies, using patents the two companies had obtained by deceiving the U.S. Patent Office with incomplete and misleading data.

The suit alleges Abbott and Fournier filed over ten lawsuits against the generic companies between 2000 and 2004, at a time when the other companies were attempting to obtain Federal Drug Administration approval for their generic versions of TriCor. Abbott and Fournier eventually lost or dismissed all of the lawsuits.

The suit alleges that Abbott and Fournier's purpose in filing the patent-infringement suits was to use the litigation process as an anti-competitive weapon. Abbott and Fournier knew that the patents upon which they based the lawsuits were unenforceable and that the legal actions could not succeed on their merits, the suit alleged. The infringement actions therefore were mere shams, designed to exclude generic competition from the TriCor market, the suit alleged.

At the same time, according to the suit, Abbott and Fournier took other action as part of their plan to block generic competition -- they made minor changes or "product switches" in the formulations of TriCor, not to improve it, but rather to prevent generic versions being substituted for the more costly TriCor.

As a result of the unfounded patent litigation and product switches, the states alleged, Abbott and Fournier have successfully thwarted all generic competition, allowing the companies to charge monopoly prices for TriCor.

The civil lawsuit against Abbott and Fournier seeks triple the amount of damages incurred by the states' public health agencies, and also seeks damages incurred by individual consumers.

The suit was filed in Federal District Court in Deleware by the attorneys general of the District of Columbia, Arizon, Arkansas, California, Connecticut, Florida, Iowa, Kansas, Maine, Maryland, Minnesota, Missouri, Nevada, New York, Oregon, Pennsylvania, South Carolina, Washington, and West Virginia.

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