AGs sue Wyeth over hospital discounts

By Chris Rizo | May 11, 2010

Rob McKenna (R)

MADISON, N.J. (Legal Newsline)-U.S. pharmaceutical manufacturer Wyeth faces legal action from 17 state attorneys general who say the company owes millions of dollars to their Medicaid programs.

Wyeth, formerly known as American Home Products and now owned by Pfizer, is accused of overcharging state Medicaid programs for its two medications to fight acid reflux, heartburn and other stomach-related illnesses.

"While most drug companies play by the rules, we're ready to confront those whose practices amount to costly abuses of taxpayer-funded health insurance programs," Washington State Attorney General Rob McKenna said.

On Friday, the attorneys general from 16 states and the District of Columbia filed a joint motion to join two whistleblower lawsuits against Wyeth over its Protonix Oral and Protonix IV medications, which belong to a class of drugs known as proton pump inhibitors used to suppress stomach acid.

The Medicaid Drug Rebate Program requires drug manufacturers to report the "best price" offered for their drugs and pay rebates to state Medicaid programs based prices that are discounted.

McKenna and other attorneys general say Wyeth intentionally failed to report to states the discounted prices they were offering to large commercial customers such as hospitals between 2001 and 2006.

The lawsuit alleges that Wyeth, through its "spillover" strategy, would make profits from the hospital agreement.

"Capturing new patients through the hospital market was important to Wyeth, not because Wyeth would make a profit while the patient was in the hospital (the deep discounts precluded any significant profit via hospital sales), but because when the patient left the hospital, Medicaid would not get the discount that the hospital enjoyed," the lawsuit says. "Instead, Medicaid would pay the retail price, potentially for years to come."

As a result of its discounted pricing arrangements known as "Protonix Performance Agreements" that offered discounted prices based on conditions, such as market share or placement on formularies, officials say Wyeth avoided paying hundreds of millions in rebates owed to state Medicaid programs.

"Drug companies that game the system are being held accountable," Utah Attorney General Mark Shurtleff said in a statement.

In addition to Washington and Utah, other states involved in the lawsuit are Colorado, Kentucky, Maine, Maryland, Minnesota, Nebraska, New Jersey, North Carolina, Oregon, Rhode Island, South Carolina, South Dakota, Vermont and Wyoming.

The attorneys general's motion to intervene in the whistleblower suit was filed in the U.S. District of Massachusetts.

From Legal Newsline: Reach staff reporter Chris Rizo at chrisrizo@legalnewsline.com.

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