18 Drug Companies Illegally Inflated Drugs’ Average Wholesale Prices, Montana Lawsuit Says

Montana's attorney general on Feb. 25 filed suit against 18 drug companies, alleging that they illegally misstated the average wholesale prices of their medications, costing the state and consumers tens of millions of dollars, the Associated Press reports. In a 44-page complaint filed in state court in Helena, Attorney General Mike McGrath (D) said that the drug makers "guaranteed windfalls for large buying groups that purchase drugs for hospitals and clinics" by reporting to the government an average wholesale price, or AWP, that was much higher than the buying groups paid for the medications. The scheme, the complaint alleges, cost both Montana and all U.S. taxpayers money because Medicare and Medicaid reimbursed the cost of the medications at a rate higher than their actual cost and, in the process, boosted the drug makers' sales by encouraging the purchase of their drugs. The AWP, "set by the drug companies without any verification," determines how much drug suppliers are reimbursed by government programs. McGrath said that seniors who buy prescription drugs through Medicare were especially hard hit by the pricing scheme because their copayments were based on the inflated AWP charges (Anez, Associated Press, 2/26). Medicare does not cover most prescription drugs but does pay for a few medications administered by providers, such as cancer therapies. Pharmaceutical companies are then required to sell the product to Medicare at 95% of the AWP, and Medicare beneficiaries generally pay 20% of the cost (Kaiser Daily Health Policy Report, 12/21/01).

Growing Controversy
The Montana suit asks the court for "unspecified restitution for losses to Montanaans and the state." In addition, the suit seeks to have the companies named in the suit pay a $2,000 fine for every false claim and a "court order requiring that future AWP's accurately reflect the wholesale prices paid by physicians and pharmacies." The drug makers named in the suit include: Abbott Laboratories, American Home Products, Amgen, AstraZeneca, Aventis, Baxter, Bristol-Myers Squibb, Chiron, Dey, Eli Lilly, GlaxoSmithKline, Hoechst Marion Roussel, Immunex, Pharmacia, Pharmacia and Upjohn, Schering-Plough, SmithKline Beecham and Warrick. The Montana suit is part of a growing controversy surrounding AWP's, as it "mirrors" one filed by Nevada last month and a suit filed in December by a coalition of consumer groups (Associated Press, 2/26). In the latter case, the Prescription Access Litigation Project sued 28 companies, alleging that they manipulated Medicare drug prices by selling doctors deeply discounted medications while encouraging the physicians to bill the government at full price (Kaiser Daily Health Policy Report, 12/21/01). The Montana complaint is available online. Note: You will need Abode Acrobat to view the complaint.