State Sues Drug Companies, Claiming Price Gouging
By WILLIAM HATHAWAY
Courant Staff Writer
March 14 2003
Seven drug manufacturers have bilked patients and state drug programs of tens of millions of dollars in a complicated price-gouging scheme, the state attorney general and consumer protection commissioner charged Thursday.
"These companies raided state coffers and patients' pockets," said Attorney General Richard Blumenthal. "The victims were people paying for vitally needed medicine."
The Department of Social Services, which pays most of the $600 million Connecticut spends annually on pharmaceuticals, joined lawsuits that seek reimbursement of overcharges to state agencies and patients.
The companies allegedly inflated the costs of some drugs - chiefly those used for cancer treatments and respiratory problems - that are reimbursable under several state programs. The companies in turn sold the drugs at deep discounts to providers such as pharmacies or doctors, who were allowed to keep the difference between the reimbursement amount and the discount cost as an inducement to prescribe and sell the drugs.
In essence, the companies used state funds to help increase the market share of their drugs, the suits allege.
"It's an absolute disgrace on the part of these companies," said Consumer Protection Commissioner James T. Fleming.
The defendants in lawsuits being filed at Hartford Superior Court are Schering-Plough Corp., GlaxoSmithKline, Aventis, Dey Inc., Warrick Pharmaceuticals, Pharmacia Corp and Roxanne Pharmaceuticals, a division of Boehringer Ingelheim, which is based in Ridgefield.
Under state drug programs, the state reimburses drug manufacturers for drugs based on their average wholesale price, minus 12 percent. However, drug companies report the costs themselves to national databases and state officials have no way of corroborating them, according to Michael P. Starkowski, deputy commissioner at DSS.
As an example, a drug company might report a price of $100 for a drug that actually costs $20, state officials said. The reimbursement paid by the state would then be $88. Drug companies then offer the difference between the actual cost and the government reimbursement - a "spread" of $68 in this example - as an inducement to help market the drug.
Among the drugs "overcharged" to the state in this manner were the asthma drug Albuterol and chemotherapy drugs Zofran and Anzemet, according to officials.
"In some cases, the companies actually market the spread to doctors," Blumenthal said. "The practice is industrywide."
Four or five other states have initiated similar actions against a number of different drug manufacturers, Blumenthal said.
Bruce Lott, senior director of public affairs for the Pharmaceutical Manufacturers Association declined to comment, saying the association does not comment on business practices of individual members.
"We haven't seen the complaint," said Pamela DeMala, spokeswoman for Boehringer Ingelheim. "But Roxanne markets its products in full compliance with the law and we are confident in our business practices."
State officials said the practice hurts all consumers, but particularly those on Medicare, who pay 20 percent of the cost of some cancer treatments as a co-payment.
State officials are still trying to calculate the total amount overcharged, but initially will seek a $15 million reimbursement to the state and possibly a similar amount for consumers.
Copyright 2003, Hartford Courant
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