Healthy Skepticism Library item: 2215
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
Mantz B.
Benefit Plan Accuses Bristol-Myers Of Fraud, Racketeering
Dow Jones Newswires 2001 Nov 19
Full text:
NEW YORK — An employee benefits plan has accused Bristol-Myers Squibb Co. (BMY) of violating federal racketeering laws and fraudulently setting list prices for its cancer drugs well above what it actually charges doctors for the medications.
The Teamsters Health & Welfare Fund of Philadelphia and Vicinity contends the New York drug giant offers significant discounts to physicians for its cancer medicines even though insurers and benefit plans reimburse for the drugs at a much higher rate, based on a list price Bristol-Myers publishes. This published cost is known as the average wholesale price.
The lawsuit alleges physicians are lured into buying Bristol-Myers’s drugs because they can pocket the difference between the average wholesale price and the actual price while insurers and benefit plans pay millions of dollars in inflated drug prices.
Bristol-Myers “created and implemented a fraudulent marketing and sales scheme to substantially increase the sale of its cancer drugs and reap unlawful profits at the expense of (the Teamsters Fund) … and systematically, by itself and with other entities and individuals, created a pervasive illegal system to cause (the Teamsters Fund) to overpay substantial amounts of money,” according to the complaint filed in federal district court in New York on Nov. 9.
The anticancer medicines include Taxol, Paraplatin, Blenoxane, Vepesid, Etopophos, and Ifex.
The pricing of cancer drug Blenoxane illustrates the Teamsters Fund’s argument. Between 1995 and 1998, the average wholesale price of Blenoxane rose to $304.60 from $276.29 while the actual cost dropped to $155 from $224.22, according to the fund, which provides health coverage for more than 28,000 participants and beneficiaries in Pennsylvania, New Jersey and Delaware.
The “system (Bristol-Myers) has set up is a weird situation where it can increase the market share and revenues by artificially increasing the price … in a behind-the-scenes activity,” Jeffrey Kodroff, an attorney at the Philadelphia law firm of Spector Roseman & Kodroff, P.C., which is representing the fund.
The Teamsters Fund is asking for class-action status for the lawsuit because other benefit plans and insurers also rely on the published average wholesale price for reimbursement. Kodroff expects the court will certify the class in a year.
The plaintiffs are seeking a change in Bristol-Myers’ marketing practices as well as unspecified monetary damages, including treble damages as punishment of violating the federal racketeering statute.
Kodroff said the Teamsters Fund did not sue physicians because they do not set the average wholesale price, upon which reimbursement is based.
Despite several calls, Bristol-Myers representatives weren’t immediately available for comment.
The private lawsuit against Bristol-Myers appeared to be shrugged off by the financial community. Shares of the New York drug maker traded at $56.37, up 71 cents, or 1.3%, on volume of 5.2 million shares, compared with average daily volume of 5.3 million shares.
“(The lawsuit) is not surprising,” said Prudential Securities analyst Tim Anderson. “We have heard about private self-insurers that might go after drug makers on the issue of the average wholesale price spread, … but the outcome is too early to say.”
Over the past year, the federal government has been investigating the sales and marketing practices of the drug industry.
Late last year, federal prosecutors issued grand jury subpoenas to Bristol-Myers, requesting information about the marketing of its anti- cancer drugs and products. They were looking into whether the drug maker had supplied oncologists with free drugs and devices in exchange for purchases of its drugs. They also were investigating whether the drug company encouraged doctors to bill government health programs improperly. In February, Bristol-Myers said it was cooperating.
The authorities also had investigated the marketing practices of Tap Pharmaceuticals Inc., a venture between Abbott Laboratories Inc. (ABT) and Japan’s Takeda Chemical Industries Ltd. The government alleged that Tap encouraged doctors to bill Medicare and Medicaid patients for free Lupron drug samples. In October, Tap agreed to pay $875 million to settle charges of fraudulent drug pricing of the prostate cancer drug Lupron, and to plead guilty to conspiracy to violate the Prescription Drug Marketing Act.
Kodroff’s Philadelphia law firm is representing a group of senior citizens who filed a class-action lawsuit against Tap, Abbott and Takeda in May. The plaintiffs’ lawsuit mirrors the government’s case.
