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State files drug price lawsuit

The state's continuing inquiry accuses three more drugmakers of bilking $25-million in Medicaid costs.

By JONI JAMES
Published July 21, 2005


TALLAHASSEE - Seven years after a small Key West pharmacy alerted Florida officials that something was amiss with Medicaid drug pricing, Attorney General Charlie Crist on Wednesday filed the third in a series of lawsuits against generic-drug makers.

The newest complaint, the latest in a national trend, alleges that three pharmaceutical manufacturers knowingly misled the state's Medicaid program into paying $25-million too much for medicine in the past 11 years.

Two earlier suits, one filed in 2003 and another in April, make the same allegation against six other companies. Crist estimates the total cost to taxpayers has been at least $75-million. State tax dollars account for about 40 percent of Medicaid spending; federal tax dollars pay the rest.

"We are talking about serious money," Crist said. "Medicaid costs are out of control and one of the biggest problems is the level of fraud." Crist inherited the investigation from his predecessor, Bob Butterworth.

The lawsuits come at a time of increasing scrutiny in Washington over drug prices, with the anticipated launch next year of a national drug benefit under Medicare.

The companies are accused of inflating the average wholesale price reported for state Medicaid programs. A pharmacy would pay the company less for the drugs and profit each time Medicaid reimbursed it, the suits allege.

The bigger the spread a generic-drug maker could offer a pharmacy, the more likely it was to win business at taxpayer expense, the lawsuits allege.

"We're talking about generic. The only thing they have to market is price," said Mark Thomas, the North Florida bureau chief for Crist's Medicaid Fraud office.

Wednesday's lawsuit, filed in Leon County Circuit Court, names three defendants and various subsidiaries or parent companies: Mylan Pharmaceuticals of Morgantown, W.Va.; Teva Pharmaceutical USA of North Wales, Pa.; and Watson Pharmaceuticals of Corona, Calif.

The lawsuits allege violation of common law fraud and the Florida False Claims Act. The latter allows civil courts to triple damages, increasing the state's potential recovery in all three suits to $225-million.

None of the companies could be reached for comment.

Crist's action is just the latest in a litany of lawsuits across the country stemming from information provided by a single whistle-blower: Ven-A-Care of the Florida Keys, a small pharmacy that used to be the leading provider of infusion drug services to homebound AIDS patients in Key West.

Since 2000, Ven-A-Care has gotten rich from successful whistle-blower suits that recouped millions of Medicaid or Medicare dollars for states and the federal government. Medicaid is a state-run health care program for the disabled and very poor. Medicare is a federal health care program for the elderly.

Under federal and state laws, whistle-blowers who provide evidence that a government agency has been bilked are entitled to a share of the recouped losses.

Ven-A-Care helped Texas' Medicaid program win a $27-million settlement in May 2004 from Schering-Plough and its subsidiaries. The pharmacy collected $5.4-million.

In 2001, the whistle-blower collected $1.5-million for work on a multistate case charging Bayer Corp. of Pittsburgh with inflating wholesale prices to Medicaid programs. The company paid $14-million to settle the claims, but admitted no wrongdoing. Florida's share of that settlement was $1.2-million.

And officials in California and Minnesota credit Ven-A-Care with providing key information for lawsuits against generic-drug makers.

Should Florida's lawsuits against the nine generic-drug manufacturers succeed, the owners of Ven-A-Care would be entitled to 15 to 25 percent of the restitution, Thomas said.

Ven-A-Care officials couldn't be reached for comment. News accounts indicate the pharmacy, founded by a doctor, a pharmacist, a nurse and a businessman, first became aware of inflated wholesale prices in 1991, when it received a check for far more than it expected for services provided to Medicare patients.

But its major success as a whistle-blower came in 2000, six years after it first filed a federal whistle-blower complaint against its competitor National Medical Care of Massachusetts. After Ven-A-Care snubbed the company's buyout offer, NMC nearly put it out of business by locking up exclusive referral agreements with local doctors. And it pushed drugs with inflated reimbursement rates to make more money, the pharmacy alleged.

The U.S. Justice Department eventually won $486-million from NMC's new owners to settle antitrust allegations. Ven-A-Care received $40-million.

"They are very valuable whistle-blowers," Thomas said. "They know what they're talking about."

Defendants in Florida's two other Ven-A-Care-inspired lawsuits are Sandoz Inc. of Princeton, N.J.; Ivax Pharmaceuticals of Miami; Purepac Pharmaceuticals of Cranford, N.J.; Dey LP of Napa, Calif.; Roxane Laboratories of Columbus, Ohio; Warrick Pharmaceuticals of Kenilworth, N.J., and numerous subsidiaries and parent firms.

[Last modified July 21, 2005, 00:55:05]


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