Wednesday, March 10, 2004

Drug firms defrauded Medicaid, state says

Ohio sues, names Chesley its counsel

By Mike Boyer
The Cincinnati Enquirer

Ohio Attorney General Jim Petro filed a lawsuit Tuesday in Hamilton County accusing five leading drug companies of defrauding Ohio's Medicaid program of "tens of millions of dollars."

The lawsuit, filed in Common Pleas Court by Cincinnati lawyer Stan Chesley, Petro's special counsel, accuses the firms of "knowingly issuing false and misleading wholesale price and acquisition data" used by the Ohio Department of Job and Family Services and other agencies to pay for prescription drugs at allegedly inflated prices.

At least six states have brought legal action against drug companies, accusing them of inflating Medicaid drug costs.

The Ohio Medicaid program spends more than $1 billion annually for prescription drugs for qualifying low-income and disabled Ohioans and pays a 20 percent co-pay for Ohio Medicare beneficiaries.

Named in the suit are Dey Corp. in Napa, Calif.; Abbott Laboratories Inc. in Abbott Park, Ill.; Pharmacia Corp. in Peapack, N.J.; Schering-Plough Corp. in Madison, N.J., and Warrick Pharmaceuticals Corp. in Reno, Nev. A Petro spokeswoman said other firms might be added.

The suit charges all five companies with violations of the Consumer Sales Practices Act, Medicare fraud, unjust enrichment and violations of Ohio's anti-kickback law.

Prescription-drug reimbursement under the Ohio Medicaid program is set by formulas based on the maximum allowable cost established for drugs. The maximum allowable cost for non-generic drugs is based on wholesale costs determined from information provided by manufacturers and a pricing update service.

"The cost data provided by these defendants is false and misleading, resulting in prices being far higher than the wholesale prices actually charged by these companies," Petro said. In most cases, he said, the "average wholesale price" bore no relation to any price.

The suit seeks unspecified compensatory damages, punitive damages and civil penalties.

A Petro spokeswoman said Chesley was picked about six months ago to lead the litigation.

"I'm very pleased he chose me as lead counsel. We know the drug companies," Chesley said, citing his experience with lawsuits involving drug companies.

The state's Medicaid prescription-drug expenses increased 23 percent from 2000 to 2001, the lawsuit said. Prescription-drug reimbursement was 12 percent of the total Ohio Medicaid expenditures in 2000. But from 2000 to 2001, the lawsuit says, the increase in prescription-drug expenses accounted for 21 percent of the increase in Medicaid expenditures.


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