Judge Rules U.S. Drug Companies Defrauded Medicare with Price Fixing Scheme

Wednesday, December 19, 2007 by: David Gutierrez, staff writer
Tags: drug companies, price fixing, medical fraud

(NewsTarget) A federal judge has ruled that three pharmaceutical companies artificially marked up their prices in order to defraud Medicare and encourage doctors to prescribe their drugs over those of competitors.

The decision came in a class-action lawsuit against AstraZeneca, Bristol-Meyers Squibb, Johnson & Johnson and Warwick Pharmaceuticals, a subsidiary of Schering-Plough Corp. U.S. District Judge Patti Saris ruled against AstraZeneca, Bristol-Meyers Squibb and Warwick, while clearing Johnson & Johnson of "egregious misconduct."

However, she described even Johnson & Johnson's actions as "troubling."

Saris agreed with the plaintiffs' complaint that the drug companies deliberately inflated their average wholesale prices in 2003, when those prices were still used to determine Medicare reimbursements. This created a gap between the prices Medicare was paying and the (lower) prices charged to doctors and pharmacies. This meant that doctors would actually be reimbursed more than they had paid for the drugs, creating a profit incentive for doctors to prescribe certain products.

The judge ruled that AstraZeneca had overcharged for its prostate cancer drug Zoladex and ordered the company to pay nearly $4.5 million to one of the two groups of plaintiffs. Likewise, she found that Bristol-Meyers Squibb had overcharged for cancer drugs Blenoxane, Cytoxan, Rubex, Taxol and Vepesid, and ordered the company to pay $183,454. Saris requested more information to set damages amounts for the other group of plaintiffs.

While Saris did not decide on the damages the company must pay, she ruled that Warrick had overcharged for the generic asthma medication albuterol sulfate (the same medicine sold by GlaxoSmithKline under the brand name Ventolin).

One of the plaintiffs' lawyers, Steve Berman, said that his clients were very happy with the ruling.

"We are also grateful that she found [that] the biggest victims were the patients who had to pay these outrageous prices out of pocket as a result of the defendants' wrongful conduct," he said.