Utah AG Sues Drug Companies For Defrauding Taxpayers

September 25, 2007 -- Utah Attorney General Mark Shurtleff filed a lawsuit against ten pharmaceutical manufacturers for defrauding Utah’s Medicaid program in a scheme that cost state taxpayers approximately $114 million over the past decade. The suit alleges the companies wrongfully inflated prices for generic prescriptions for Medicaid patients.

An investigation by the Attorney General’s Medicaid Fraud Control Unit (MFCU) revealed that ten companies-Actavis US, Inc.; Barr Laboratories, Inc.; Endo Pharmaceuticals, Inc.; ETHEX Corporation; Mylan Pharmaceuticals, Inc.; Par Pharmaceutical, Inc.; Ranbaxy Pharmaceuticals, Inc.; Sandoz, Inc.; Teva Pharmaceuticals USA, Inc.; and Watson Pharmaceuticals, Inc.-enabled Medicaid pharmacies to get reimbursements that far exceeded the cost of the drugs.

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Utah’s Medicaid program reimburses pharmacies, physicians and other medical providers for the drugs they dispense to about 300,000 low-income and disabled individuals. The reimbursements are based on the “average wholesale price” of the drugs. According to the complaint, these manufacturers “knowingly” and “intentionally” inflated prices to the Medicaid program which caused the taxpayer-funded program to overpay for medications. In one instance, the average wholesale price was 500 times the actual cost of the drug.

“This scheme does three things: manufacturers sell more products, pharmacies receive excess money and taxpayers get stuck with the bill. These companies cheated the public and hurt vulnerable Utahns in need of medicine and health care,” says Attorney General Mark Shurtleff.

The complaint adds that manufacturers in many instances marketed to pharmacists in order to convince them they could make more money in Medicaid reimbursements from their products instead of their competitors’ products. Millions of false claims were allegedly filed since the scheme began as early as 1994.

“Significant increases in prescription drug costs in recent years have contributed to a health care funding crisis within the State that requires action to ensure fair dealing between the Defendants and the State,” wrote Assistant Attorney General David Stallard in the complaint.

This lawsuit is the first of its kind brought by the Utah Attorney General’s Office against drug manufacturers. More litigation is expected because Utah has overpaid an estimated $300 million during the past ten years-one-fourth of the state’s total Medicaid drug bill. The lawsuit alleges violations of the Utah False Claims Act and common law fraud. Under Utah law, the state can seek restitution along with civil penalties equal to three times the restitution amount and $5,000 to $10,000 for each false claim.

Source: Utah Attorney General