Magazine article Clinical Psychiatry News

States Suing Drugmakers over Medicaid Pricing

Magazine article Clinical Psychiatry News

States Suing Drugmakers over Medicaid Pricing

Article excerpt

The recent spate of lawsuits by states over drug companies' use of the Medicaid drug pricing system is likely to continue, several experts say.

Some of the suits filed by state attorneys general are quite blunt. "The defendants have engaged in a scheme that siphons off money intended for the Arkansas Medicaid program," reads a suit filed in January by Arkansas Attorney General Mike Beebe. Another, filed by Pennsylvania Attorney General Jerry Pappert, says: "The drug companies ... have engaged in an unfair and deceptive marketing and sales scheme and conspiracy to provide improper incentives and inducements to medical providers ... to promote the sale of Defendants' drugs at inflated prices."

Other states that have filed suits include California, Nevada, New York, Connecticut, and Ohio.

At issue in the suites is the method pharmaceutical companies use to determine the price of drugs and the amount of the rebates they give to state Medicaid programs. (See box.)

When the reported average wholesale price (AWP) is inflated, the higher price paid by Medicaid for the drug gives pharmacies and physicians an incentive to keep stocking and selling that manufacturer's drug, meaning that the manufacturer with the inflated AWP will gain a greater share of the market and sell more drugs than competitors who use the standard industry markup.

That is what states are alleging that the manufacturers have been doing. Calls seeking comment on the cases made to three different drug companies listed as defendants were not returned. A spokesman for the Pharmaceutical Research and Manufacturers of America, a Washington trade group for drug companies, said the group cannot comment on the issue because it involves drug pricing.

Because of their similarity, some of the cases have been consolidated into a case that is pending at a federal court in Boston. The consolidation is acceptable to the defendants because "it is a waste of resources to fight 50 different cases in 50 different state courts, all of which are likely to interpret laws somewhat differently" said Carolyn McElroy, a partner in the Washington office of Mintz, Levin, Cohn, Ferris, Glovsky, and Popeo, a Boston-based law firm. "It would be somewhere between difficult and impossible for manufacturers to sell products under dozens of unique state interpretations of pharmaceutical pricing practices in the future."

Some states, such as New York, have successfully lobbied to get themselves removed from the consolidated case; the New York case is now back at the state supreme court, according to a spokesman for New York Attorney General Eliot Spitzer. …

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