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    Federal Judge Rules Three Pharmaceutical Companies Engage In Unfair Practices For Medication Prices

U.S. District Judge Patti Saris in Boston on Thursday ruled that AstraZeneca, Schering-Plough and Bristol-Myers Squibb engaged in unfair and deceptive trade practices related to the prices of some their medications, Dow Jones/Boston Globe reports (Dow Jones/Boston Globe, 6/22). Saris dismissed similar allegations against Johnson & Johnson. The decision affects patients who paid for certain medications from December 1997 to 2003 (Dow Jones/Newark Star-Ledger, 6/22).

In the case, the plaintiffs alleged that the companies sold medications to physicians at a large discount from the "average wholesale price," or AWP, and encouraged them to seek full reimbursement for the treatments from health insurers (Bloomberg/New York Times, 6/22). Some health insurers have used AWP to calculate reimbursements for medications, a practice that Medicare ended in 2003 because of allegations that pharmaceutical companies inflated the measure artificially to increase their profits (Won Tesoriero/Korn, Wall Street Journal, 6/22). The lawsuit seeks hundreds of millions of dollars in damages (Bloomberg/New York Times, 6/22).

Saris ordered AstraZeneca to pay fines of $4.45 million to non-Medicare third-party payers and BMS to pay fines of $183,000. In addition, Saris said that she will review additional information from plaintiff attorneys before she decides on additional damages for third-party payers for copayments for some medications (Wall Street Journal, 6/22). Plaintiff attorneys have until Aug. 1 to provide their calculations of damages.

Decision Details
In a 183-page decision, Saris wrote, "The Medicare statute itself created a perverse incentive by pegging the nationwide reimbursement for billions of drug transactions a year to a price reported by the pharmaceutical industry, thus putting the proverbial pharmaceutical fox in charge of the reimbursement chicken coop. The different pharmaceutical companies unfairly took advantage of the system by setting sky-high prices with no relation to the marketplace."

Saris said that false publication of AWP for the prostate cancer medication Zoladex by AstraZeneca exceeded the amount physicians paid for the treatment by as much as 169% and that false publication of the measure for the breast cancer medication Taxol by BMS exceeded the amount physicians paid for the treatment by as much as 500%. In addition, false publication of AWP for albuterol sulfate -- a generic medication used to improve breathing for patients with asthma, emphysema and other lung ailments -- by Schering-Plough subsidiary Warrick Pharmaceuticals exceeded the amount physicians paid for the treatment by 100% to 800%, Saris said (Bloomberg/New York Times, 6/22).

She wrote, "Unscrupulously taking advantage of the flawed AWP system ... by establishing secret mega-spreads far beyond the standard industry markup was unethical and oppressive," adding that such practices "caused real injuries to the insurers and patients" who paid the inflated prices (Wall Street Journal, 6/22).

Company Response
AstraZeneca spokesperson Laura King said that the company "has competed responsibly with respect to pricing and marketing of drugs, and we have acted at all times in accordance with the law" (Bloomberg/New York Times, 6/22). An AstraZeneca spokesperson added that the lawsuit was "without merit" and that the company might appeal the decision (Dow Jones/Boston Globe, 6/22).

BMS spokesperson Laura Hortas said that the company "is not responsible for the average wholesale price reimbursement benchmark used by private insurers and Medicare and that its own pricing, sales and marketing practices were fair and reasonable." BMS plans to appeal the decision, Hortas said (Bloomberg/New York Times, 6/22).

A Schering-Plough spokesperson said that the company might appeal the decision (Wall Street Journal, 6/22).

"Reprinted with permission from You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at The Kaiser Daily Health Policy Report is published for, a free service of The Henry J. Kaiser Family Foundation . © 2005 Advisory Board Company and Kaiser Family Foundation. All rights reserved.

Publication Date: 2007-06-25 05:00

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