HealthLawProf Blog

Editor: Katharine Van Tassel
Concordia University School of Law

Friday, August 26, 2005

Drug Companies and Fraud

If the Merck Vioxx case where not sufficient to have drug companies worried, the New York Times reports today that California has sued 39 drug companies for price gouging. 

The attorney general of California sued 39 drug companies on Thursday, accusing them of bilking the state of hundreds of millions of dollars by overcharging for medicines.

Attorney General Bill Lockyer charged that the drug makers, including some of the world's leading pharmaceutical concerns, defrauded the state's Medi-Cal system for at least the past decade. Mr. Lockyer said the drug manufacturers charged Medi-Cal as much as 10 times the price for some drugs as they charged others, like private pharmacies and hospitals.

Medi-Cal is the state's version of the federal Medicaid program for the poor, which is jointly financed by the states and the federal government. Drug costs account for about $4 billion of Medi-Cal's $34 billion annual budget.

"We're dragging these drug companies into the court of law because they're gouging the public on basic life necessities," Mr. Lockyer said at a news conference here. "This scheme has cost California taxpayers potentially hundreds of millions of dollars and is jeopardizing the public health by diverting money away from patient care."

Mr. Lockyer said that each of the companies made as much as $40 million a year in illegal profits. He said he hoped to recover that amount plus the triple damages allowed under the state's false claims act.

Thursday's legal filing amends a 2003 suit against two drug companies, Abbott Laboratories and Wyeth Pharmaceuticals, to add about three dozen new defendants, including Amgen, Baxter Healthcare, Bristol-Myers Squibb, GlaxoSmithKline, Mylan Laboratories, Novartis and Schering-Plough. It was immediately consolidated in federal court in Boston with similar litigation filed by more than 10 other states and localities, including New York, Texas, Florida and Illinois.


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