California settles with Squibb for $23 million

Legal News Line Jul. 16, 2008, 12:00pm

Jerry Brown (D)

SACRAMENTO, Calif. (Legal Newsline)-As prescription powerhouse Bristol-Myers Squibb Co. announced more than half a billion dollars in settlements, California attorney general's office said the $23 million it received was among the bigger payoffs in a sweeping probe of prescription drug pricing.

Gareth Lacy, spokesman for the Attorney General's office, told Legal Newsline on Tuesday that the settlement with Squibb was a big recovery in a case that included many of the nation's largest drug companies.

"We still have about 15 companies still pending settlements," Lacy said, "but the large recognizable companies have all settled."

In 2001, many drug companies were involved in reporting artificially high drug prices to the state Medicaid program, known as Medi-Cal, Lacy said.

Some were extremely inflated, as much as 1,000 percent over the actual cost.

"The Medi-Cal system requires companies to accurately report drug prices to the state," Attorney General Jerry Brown said. "Bristol Myers-Squibb grossly inflated its reported drug prices and then used the artificially high price to increase its market share."

In the simplest terms, the reports of artificially high prices led pharmacists to believe they were being offered reduced prices, when in fact they were escalated. Little about the case was simple however.

The convoluted price escalation first came to light in 2001 by whistleblowers within the company that reported the practice, Lacy said, and involved federal investigators in addition to numerous state attorneys general.

Though many defendants were named in California's lawsuit, Lacy said the settlement with Bristol Myers Squibb was a large one.

"We settled for almost $10 million from five companies, so $23 million from one company is a lot," he said.

California found evidence of violations in many areas including: reporting inflated average wholesale prices for physician-administered drugs, engaging in an array of kickback activities to enhance their market share, illegally marketing its atypical drug Abilify and concealing its best price to the U.S. Centers for Medicare and Medicaid Management, according to the Attorney General's office.

The attorney general's office said $12 million of the settlement will go to Medi-Cal with the rest going into the state's false claims fund. Bristol Myers-Squibb admitted no wrongdoing in accepting the settlement.

"The Bureau of Medi-Cal Fraud and Elder Abuse will continue to investigate and prosecute any alleged fraudulent conduct by any health care provider whose services or products are paid for by Medi-Cal," Brown said.

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