Healthy Skepticism Library item: 10711
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
Tesoriero HW, Korn M.
Ruling on Drug Pricing Faults Three Companies
The Wall Street Journal 2007 Jun 22B4
http://online.wsj.com/article/SB118245513554143815.html?mod=yahoo_hs&ru=yahoo
Full text:
federal Schering, Bristol-Myers, AstraZeneca Are to Face New Legal Challenges
A federal judge ruled that pharmaceutical companies AstraZeneca Plc, Schering-Plough Corp. and Bristol-Myers Squibb Co. engaged in unfair and deceptive trade practices regarding some of their drug prices.
The decision could make the companies more vulnerable in future cases. The judge ruled that Johnson & Johnson didn’t violate the law.
The four companies were defendants in a suit that alleged they inflated the average wholesale prices, or AWP, they reported for certain drugs. The AWP has been used as a benchmark by insurers to calculate drug reimbursements. But it has come under heavy scrutiny in recent years amid allegations that manufacturers inflated that measure artificially to boost profits. In 2003, Medicare ceased using the AWP as a basis for drug reimbursements, but some third-party payers continued to reference it.
In the case, U.S. District Court Judge Patti B. Saris in Boston applied Massachusetts state law. Given her decision in this first stage, it is likely the judge will certify a national class to deal with the claims from other states. She ordered AstraZeneca to pay damages of $4.45 million to non-Medicare third-party payers and Bristol-Myers Squibb to pay damages of $183,000. The ruling affects third-party payers who paid for certain prescription drugs from December 1997 to 2003.
In her opinion, Judge Saris wrote that “Unscrupulously taking advantage of the flawed AWP system … by establishing secret mega-spreads far beyond the standard industry markup was unethical and oppressive.” She also wrote that such practices, “caused real injuries to the insurers and patients” who paid inflated prices for life-sustaining drugs.
The judge asked for more information before deciding on further restitution to third-party payers for co-payments for some drugs. Plaintiffs’ attorney Steve Berman said the decision “positions the litigation very well for us. In our view, the companies are now on the hook.” Mr. Berman said the damages could be significant in the next round of the litigation. Plaintiffs will be seeking damages of $500 million from AstraZeneca, which could be doubled or trebled, per individual states’ laws.
A spokeswoman for AstraZeneca said the company competed responsibly with respect to pricing its drugs and said the suit was “without merit.” The company is considering its appellate options. A Bristol-Myers Squibb spokeswoman said the company intends to appeal the damages and maintained that the company isn’t responsible for the wholesale price reimbursement benchmark used by insurance companies, insisting its internal practices are fair and reasonable. A Schering-Plough spokesman said the company was pleased the court had narrowed the scope of the case from the plaintiff’s original suit. It is also considering an appeal.
Write to Heather Won Tesoriero at heather.tesoriero@wsj.com and Melissa Korn at melissa.korn@wsj.com
