State Suit Targets Illegal Pricing Scheme For Cancer Drugs

Attorney General Spitzer today accused three of the nation's leading pharmaceutical manufacturers - GlaxoSmithKline, Pharmacia and Aventis - of each conducting elaborate illegal schemes to inflate the price of prescription drugs for consumers and government health plans.

In a first-of-its-kind set of lawsuits, Spitzer is charging drug companies with consumer fraud, commercial bribery, and making false statements to government health plans. New York is the first to attack the drug companies' pricing scheme by alleging bribery and false statements.

"New Yorkers face a health care crisis - a crisis driven to a large degree by the enormous growth in the cost of prescription drugs. This cost explosion is eroding individuals' health care and is a large factor in the massive state deficit. With this action, we are sending a strong signal that the state of New York will use the law to bring health care costs under control," Spitzer said.

New York's lawsuits focus on the companies' reporting of the "average wholesale price" and other measurements by which the average wholesale price is calculated. Government health plans, such as Medicare, Medicaid and EPIC, base reimbursement for drugs on the average wholesale price figure.

The companies are alleged to have reported an inflated average wholesale price in relation to the price charged to doctors, pharmacists and other health care providers. The companies exploit this "spread" to market their drugs, improperly inducing doctors to prescribe drugs and thereby increase companies' market share.

For example, at various points in time, a spread of approximately 76 percent existed for Doxorubicin (Pharmacia's Adriamycin RDF/PFS), an injectable drug used to treat various cancers including breast and ovarian cancer. This means that a 76 percent savings ($21.2 million) to Medicare would have resulted if wholesale catalogue prices had been the basis for reimbursement as opposed to the published average wholesale price reported by the companies.

As a result of such inflated prices, government health plans and consumers nationwide have grossly overpaid for drugs -- as much as hundreds of millions of dollars. Spitzer noted that in some cases, the consumer's cost (after insurance) is actually higher than what the doctor actually pays for the drug. This practice is especially egregious because many of the drugs involved are cancer treatment drugs, including a class of drugs known as anti-emetics, which help people deal with the side effects of chemotherapy.

The scheme also results in massive overpayments by government health plans.

"We are seeking restitution for consumers and the state, and new reforms that will help maintain the integrity of the doctor-patient relationship, by making sure that medical decisions are based on sound clinical guidelines, not on whether a manufacturer's drug delivers higher compensation to a provider," Spitzer said.

The legal action seeks to stop the companies' fraudulent behavior, provide restitution to New York residents and the state, and other costs and penalties. The total amount of the claim is unknown at this time but is expected to be in the tens of millions of dollars.

Lawsuits were filed today against Pharmacia and GlaxoSmithKline in Albany County Supreme Court. A pre-litigation notice has been sent to Aventis.

The case is the latest in a series of actions against major drug companies. The Attorney General recently announced an anti-trust settlement with drug manufacturers -- Aventis and Andrx -- which requires them to pay $80 million nationwide to compensate consumers, state agencies, and insurance companies who overpaid for Cardizem CD and its generic equivalents. Spitzer also has settled cases against Mylan Laboratories over illegal price increases of Clorazapate and Lorazapem, two generic anti-anxiety drugs. Previously, he reached a $42 million multi-state settlement with BASF, Inc. over its attempt to prevent publication of a study showing that some generic drugs were equivalent to Synthroid, the most commonly prescribed synthetic thyroid hormone replacement medication, in treating thyroid disorders.

The cases filed today are being handled by a team of lawyers led by Assistant Attorneys General Rose Firestein and Shirley Stark of the Consumer Frauds and Protection Bureau. The other members of the team are: Special Assistant Attorney General Patrick Lupinetti, Chief of Special Projects in the Medicaid Fraud Control Unit; Assistant Attorneys General David Sharpe and Carol Beyers of the Health Care Bureau; Assistant Attorney General John Ioannou and Director of Economics Hampton Finer of the Antitrust Bureau; and Assistant Deputy Attorney General Daniel Feldman and Assistant Attorney General Galen Kirkland.