Mich. AG files suit over generic drug prices

By Jessica M. Karmasek | Jun 7, 2011


LANSING, Mich. (Legal Newsline) - Michigan Attorney General Bill Schuette said Monday his office has filed a lawsuit against a national pharmaceutical wholesaler and a drug pricing publisher for civil penalties.

Schuette's office said it also is seeking to recover millions in taxpayer dollars spent as a result of a scheme to artificially inflate prices for certain brand-name and generic drugs.

The lawsuit was filed Thursday by the State in Ingham County Circuit Court against McKesson Corporation and Hearst Corporation and its subsidiaries, including First DataBank.

The suit specifically alleges the companies conspired to inflate average wholesale prices for certain drugs by 5 percent, resulting in the Michigan Medicaid Program overpaying many millions for pharmacy claims from 2001 to 2009. During this same time period, Michigan Medicaid spent nearly $2 billion on the brand-name pharmaceuticals in question, as well as about $80 million on the affected generic drugs.

"It's an insult to hard-working citizens when fraudulent practices cause their taxpayer dollars to be wasted or misused," Schuette said in a statement. "We will bring the hammer down on anyone who defrauds the state."

The Attorney General's Office alleges in its lawsuit that McKesson, one of the largest drug wholesalers in the United States, and Hearst, the leading publisher of pharmaceutical pricing data, entered into a secret agreement in 2001 to manipulate drug price data to portray the false inflation of the average wholesale prices of certain brand-name prescription drugs by 5 percent.

The inflated prices did not reflect any actual increases in the manufacturer's prices or prices pharmacies were paying to drug wholesalers, Schuette's office explained. The suit also alleges that the companies recognized the scheme would cause an artificial increase in average wholesale prices for certain generic drugs.

Schuette says both McKesson and Hearst reported the false prices with the express purpose of securing higher reimbursements from the Michigan Medicaid Program and other payors.

According to the Attorney General's Office, the inflated prices remained in place from late 2001 through September 2009, when a "rollback" was implemented.

Michigan's lawsuit seeks to recover the many millions of those Medicaid payments that were, in fact, overpayments due to false mark-ups, as well as civil penalties for causing false claims to be submitted.

The suit has been assigned to Ingham Circuit Court Judge Rosemarie Aquilina. A hearing hasn't yet been scheduled, Schuette's office said.

From Legal Newsline: Reach Jessica Karmasek by e-mail at jessica@legalnewsline.com.

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