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July 2, 2011. Category: Library Articles

State Suing Drug Companies for Fraud

This month, Iowa became the latest state to sue 78 major drug companies for fraud and recover millions of dollars that was lost through a “grotesque abuse of the Medicaid reimbursement system,” according to Iowa Attorney General Tom Miller. Iowa follows the lead of more than two dozen other states including Texas, Montana, and Nevada that are accusing major drug companies including AstraZeneca, GlaxoSmithKline, Pfizer, Eli Lilly & Co., and Bristol-Myers Squibb, of deliberately inflating Average Wholesale Prices (AWP) used to calculate government rebates. Texas has recovered more than $55 million so far, Miller said.

Iowa’s Medicaid program, which provides health care to low-income Iowans, spent more than $1.6 billion to pharmaceutical companies between 1992 and 2005. The complaint alleges that the prices paid by the state had no relationship to the true price of the drug and often exceeded 100%, 200%, or even more of the true price. The complaint alleged that GlaxoSmithKline marked up the price of its Zantac by 307%, and Pfizer inflated the cost of the drug Alprazolam by 1,576%. The 167-page complaint, filed in U.S. District Court in the Southern District of Iowa, accuses the companies of violating the federal Medicaid statute, breach of contract, violating the Iowa Consumer Fraud Act, fraud and unjust enrichment.

“It makes me angry that Iowa taxpayers are forced to pay more to finance record drug industry profits because the defendant drug companies do not honor their obligations under law to deal honestly with the government. The companies’ false price reporting is all the more offensive because it undercuts Medicaid, the publicly funded program created to assist those who are among our state’s most vulnerable citizens,” said Miller.

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