Healthy Skepticism Library item: 10612

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: news

Bloomberg News.
3 Drug Makers Are Convicted in Reimbursement Overcharges
New York Times 2007 Jun 22
http://www.nytimes.com/2007/06/22/business/22Drug.html?ex=1340164800&en=69c41ae25a6fff55&ei=5088&partner=rssnyt&emc=rss

Full text:

A federal judge ruled yesterday that AstraZeneca, Bristol-Myers Squibb and Schering-Plough must pay damages for overcharging on certain drugs paid for by Medicare, pension funds, insurers and patients.

Judge Patti B. Saris of United States District Court in Boston found the companies liable in a nationwide class-action lawsuit over drugs administered by doctors. She dismissed claims against Johnson & Johnson while giving plaintiffs’ lawyers until Aug. 1 to provide calculations of damages for the other companies.

The plaintiffs argued that the drug makers had sold medications to doctors at steep discounts to the “average wholesale price” that Medicare and pension funds paid, while secretly encouraging them to claim full reimbursement from insurers. The plaintiffs are seeking hundreds of millions of dollars in damages.

In a 183-page opinion, Judge Saris wrote: “The Medicare statute itself created a perverse incentive by pegging the nationwide reimbursement for billions of drug transactions a year to a price reported by the pharmaceutical industry, thus putting the proverbial pharmaceutical fox in charge of the reimbursement chicken coop. The different pharmaceutical companies unfairly took advantage of the system by setting sky-high prices with no relation to the marketplace.”

The judge found that AstraZeneca, which is based in London, acted “unfairly and deceptively” by causing the publication of false and inflated average wholesale prices for its prostate cancer drug Zoladex, which exceeded doctors’ acquisition costs by as much as 169 percent.

Bristol-Myers, of New York, caused the publication of false and inflated average wholesale prices for five drugs, including Taxol, which had spreads as high as 500 percent. Warrick, a subsidiary of Schering-Plough, which is based in Kenilworth, N.J., inflated average wholesale prices for its generic drug albuterol sulfate in a range of 100 percent to 800 percent, the judge said.

A spokeswoman for AstraZeneca, Laura King, said that her company “has competed responsibly with respect to pricing and marketing of drugs, and we have acted at all times in accordance with the law.”

A Bristol-Myers spokeswoman, Laura Hortas, said the company believes that it “is not responsible for the average wholesale price reimbursement benchmark used by private insurers and Medicare, and that its own pricing, sales and marketing practices were fair and reasonable.”

The company plans to appeal a damages award, Ms. Hortas said.