US settles with three drugmakers in pricing case
WASHINGTON — Three pharmaceutical manufacturers have agreed to pay more than $421 million to settle allegations that the companies reported inflated prices for numerous products, the Justice Department said yesterday.
The government said the companies knew that federal health care programs relied on the inflated prices to set payment rates.
The US attorney’s office in Boston, which specializes in investigating health care fraud, helped to lead the investigation. US Attorney Carmen Ortiz, who runs the Boston office, took part in yesterday’s announcement of the settlements in Washington. The Justice Department now has recovered more than $1.8 billion from pharmaceutical companies arising from similar unlawful drug-pricing schemes, Assistant Attorney General Tony West said.
In the latest settlements, Abbott Laboratories Inc. agreed to pay $126.5 million, B. Braun Medical Inc. will pay just over $14.7 million, and Roxane Laboratories Inc. agreed to pay $280 million.
West said the three companies inflated the average wholesale price for dozens of their products, including powerful antibiotics, used by Medicare and Medicaid patients. They reported these inflated prices to published national pricing lists used by the government to determine what it will pay doctors and druggists who provided those drugs to their Medicare and Medicaid patients, West said.
“This practice within the pharmaceutical industry was widespread — so much so that instead of average wholesale price, ‘AWP,’ it was jokingly said, really stood for: ‘Ain’t What’s Paid.’ Indeed, the only purchasers who paid the inflated, reported drug price were you, the American taxpayers,’’ West said.
By leading the government to believe the drugs sold at higher prices, West added, pharmaceutical companies gained market share by offering substantial profits to pharmacists and doctors who dispensed their drugs. The doctors and druggists were able to obtain the drugs at one price, be reimbursed by the government at an inflated price and pocket the difference, West said.
“This scheme then guaranteed massive profits to physicians and pharmacies that administered and sold Abbott products to their patients,’’ US Attorney for South Florida Wilfredo Ferrer said. “And the generous profit margins helped Abbott maintain and gain customers. So the way we look at it, Medicare and Medicaid in essence foot the bill for Abbott’s marketing budget.’’
The case against Abbott came to light in 2006 when the Justice Department intervened in a whistleblower lawsuit filed by a South Florida company under the federal False Claims Act.
The Justice Department sued Roxane, now formally known as Boehringer Ingelheim Roxane Inc., in 2007. It is unclear when federal authorities started investigating the allegations against B. Braun, a US subsidiary of German pharmaceutical company B. Braun Melsungen AG.
All three companies denied wrongdoing and said they only settled to end what each described as costly litigation with the federal government.