Philadelphia Senior Group Sues GlaxoSmithKline over Pricing of Medicare-Covered Prescription Drugs
The Action Alliance of Senior Citizens of Greater Philadelphia and the United Food & Commercial Workers Unions and Employers Midwest Health Benefits Fund on Nov. 19 filed a lawsuit against GlaxoSmithKline PLC for alleged Medicare fraud, the Philadelphia Inquirer reports. The suit alleges that GSK "artificially inflated" the average wholesale price reported to the government for prescription drugs covered under Medicare Part B (Slobodzian, Philadelphia Inquirer, 11/20). Under Medicare rules, the government pays doctors and clinics 95% of a drug's average wholesale price -- based on reports to the government by pharmaceutical companies -- regardless of the price that physicians or clinics have paid (Kaiser Daily Health Policy Report, 10/2). Medicare uses "pharmaceutical industry publications," including the Blue Book, Red Book and Medispan, which receive information on prices "directly from the drug firms," to determine reimbursement rates. According to the lawsuit filed yesterday, Medicare has paid prices "substantially higher" than those paid to GSK by physicians, clinics and other "private sector purchasers" (Philadelphia Inquirer, 11/20). In addition, Medicare beneficiaries, who pay a 20% copayment based on the average wholesale price, often pay more in copayments than a drug's actual retail price (Kaiser Daily Health Policy Report, 10/2).
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According to the lawsuit, consumers and "third-party payers" could have saved $175 million "had the [Medicare] reimbursements been based on actual wholesale prices." The suit calls for the establishment of a trust fund from GSK's "ill-gotten gains" that the plaintiffs would divide. The plaintiffs filed the suit under federal antitrust and civil racketeering laws, and as a result, they could receive triple damages. The lawsuit cites an HHS Office of Inspector General report that found Medicare reimbursements for 24 popular prescription drugs last year amounted to $887 million "more than wholesale prices charged to physicians and suppliers" (Philadelphia Inquirer, 11/20). The report said that to avoid overpayments on drugs, Medicare should establish a commission to set reimbursement rates, collect "more accurate" information on prices and base payments on the prices paid by drug stores and physicians (Kaiser Daily Health Policy Report, 9/24).
