AZ, BMS and S-P guilty of overcharging Medicare

AstraZeneca (AZ), Bristol Myers-Squibb (BMS) and Schering-Plough (S-P) have been found guilty of overcharging the US reimbursement system Medicare by a US judge in Boston last week.

The plaintiffs of the lawsuit claimed the drug manufacturers sold medicines to doctors at a great discount to the published average wholesale prices (AWPs) that Medicare and pensions funds paid , while secretly encouraging doctors to claim the full amount back from insurers.

US District Judge Patti Saris found the companies "unfairly and deceptively caused false AWPs to be published knowing that payers and the government did not understand the truth and the severity of the markups".

AZ acted "unfairly and deceptively" by publishing false and inflated AWPs for its prostate and breast cancer drug Zoladex, according to Saris.

It was found that the AWP for Zoladex exceeded the amound paid by doctors by169 per cent. She also found the company marketed the ìmega-spread' to induce doctors to buy its drug based on profitability.

BMS was found to have increased it prices for five drugs, including Taxol, a cancer drug that was inflated as much as 500 per cent.

S-P's Warrick unit increased the price of its generic asthma medication albuterol sulfate by much as 800 percent, she said. S-P was "pleased that the Court found no liability against Warrick Pharmaceuticals, its generic subsidiary, for the period from 1991 through 1997 and from 2000 through 2003, [but] it disagreed with the Court's finding of limited liability against Warrick with respect to one form of a generic product, albuterol sulfate solution, in the years 1998 and 1999."

"While the Court has scheduled further proceedings on damages, plaintiffs' claim for damages for this one formulation during 1998 and 1999 totalled less than USD100,000," it continued.

Johnson & Johnson was cleared of wrong doing, although the judge found its behaviour "at times troubling".

If other states follow, the companies could be forced to pay out millions of dollars.

In the case, the plaintiffs alleged that the companies sold medications to physicians at a large discount from the "average wholesale price," or AWP, and encouraged them to seek full reimbursement for the treatments from health insurers.

The ruling affects patients who paid for prescription medication from December 1997 to 2003 and have been reimbursed by Medicare, private insurers and those patients making coinsurance payments based on AWP.

Steve W Berman, managing partner of Seattle-based Hagens Berman Sobol Shapiro which filed the lawsuit, said: "We are also grateful that she found the biggest victims were the patients who had to pay these outrageous prices out of pocket as a result of the defendants wrongful conduct."

The Massachusetts ruling was a test case with trials for the rest of the states to follow. Berman sees some companies like AstraZeneca facing exposure in the hundreds of millions.

"We are looking forward to continuing the prosecution of this case against the remaining defendants who perpetrated similar if not identical wrongs against patients and insurers nationwide," said Berman. "We view this ruling as a big win that should serve notice to all defendants that they will be called to account for their wrongdoing."

According to analysts at Dresdner Kleinwort: "This was a pilot case in Massachusetts, and it is likely similar suits will go forward in other states and nationwide."

They continue: "It is hard to estimate final damages. However it is likely to settle in the tens of millions of dollars even though plaintiffs will seeks hundreds of millions in damages so overall limited impact for the industry financially."