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US government probes Lilly and Merck over drug pricing

Department of Justice investigates drug pricing with regard to Medicaid programme

The drug pricing debate rumbling along in the US has taken another turn, with both Merck & Co and Eli Lilly disclosing they are under investigation by the Department of Justice.

The DoJ's action - which seems to focus on the way pharma companies report product prices to the government-run Medicaid programme - comes as other drugmakers including Valeant are also in the spotlight over drug prices and distribution practices.

Lilly revealed in an SEC filing that it had been asked to provide information on "certain distribution service agreements with wholesalers", specifically with regard to working out and reporting average manufacturer prices (AMP) for the Medicaid drug rebate programme.

Pharma companies pay rebates to Medicaid based on the AMP paid by wholesalers for medicines, which allows the US government to claw back money from participating companies in return for inclusion in the Medicaid programme.

Earlier cases have alleged that drugmakers have under-reported AMPs for a number of their drugs by improperly reducing the reported AMPs for service fees they paid to wholesalers. In July both AstraZeneca (AZ) and Cephalon settled an action brought by the US government which accused them of underpaying. AZ paid nearly $47m to settle the cases, with Cephalon stumping up $7.5m, and at the time the DoJ said it would "continue to police the pharmaceutical industry when the Medicaid program overpays for drugs."

Meanwhile, Merck has revealed that it has received a "civil investigative demand" for information relating to the company's contracting and pricing of Dulera (mometasone furoate/formoterol fumarate dihydrate) - used to treat asthma - with "certain pharmacy benefit managers and Medicare Part D plans."

Dulera sales were $383m in the first nine months of the year, growing a healthy 17% on the back of strong demand in the US, according to Merck's filing.

Both companies have indicated they will cooperate with the investigations, which have been initiated by the US Attorney's Office for the Eastern District of Pennsylvania.

The probes comes at a time of increased scrutiny of pharma pricing activities - including Turing Pharma's massive price hike for a drug used to treat an opportunistic infection in HIV and cancer patients - as well as attempts by lawmakers to introduce new legislation to tackle the issue.

Last week, a new investigation was launched by the Senate Special Committee on Aging into the price of off-patent drugs which cited Turing and Valeant as well as two other companies - Retrophin and Rodelis Therapeutics.

Article by
Phil Taylor

9th November 2015

From: Regulatory



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