Pharma companies settle Kentucky's AWP suits

By Nick Rees | Apr 1, 2011


FRANKFORT, Ky. (Legal Newsline) - Kentucky Attorney General Jack Conway announced a $10.2 million settlement on Wednesday with two pharmaceutical manufacturers over allegations that they published false average wholesale prices for their drugs.

The settlements with Alpharma USPD Inc., and Purepac Pharmaceutical Co., are the latest in a flurry of AWP lawsuits Conway filed against 46 major drug companies.

The Iceland-based global pharmaceutical company Actavis purchased Alpharma and Purepac in 2005. Alpharma primarily manufactured and marketed generic solutions, injectables, creams and ointments, while Purepac manufactured a wide variety of generic drugs in tablet and capsule form.

The Kentucky Medicaid program uses AWPs to calculate Medicaid drug reimbursement rates. Alpharma and Purepac allegedly published significantly inflated AWPs for their drugs that had no relationship to prices paid by customers for the drugs. As a result, an artificial "spread" was created between the inflated published prices and the real price that exceeded 3,200 percent in some cases, Conway claims.

These spreads were then used by Alpharma and Purepac as a sales tool in marketing the drugs to customers, allowing the companies to increase their profits and market share in the pharmaceutical industry, Conway says.

Because of the inflated AWPs, the Kentucky Medicaid program paid substantially more for Alpharma and Purepac drugs than Kentucky pharmacies paid to acquire them, Conway says.

"Taxpayers should not be footing the bill for these inflated drug prices," Conway said. "My office is committed to ensuring that drug companies truthfully report their prices and do not engage in false or misleading business practices."

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