AG suing drug companies for overcharging Louisiana Medicaid

Staff reports

Attorney General Buddy Caldwell filed suit in the 19th Judicial District against 18 drug companies, alleging they unlawfully inflated drug costs paid by Louisiana taxpayers through the Medicaid program.

The lawsuit alleges that the pharmaceutical companies deliberately misreported drug price information in order to increase reimbursements made by Louisiana’s Medicaid program.  These reimbursements by the Louisiana Medicaid program are based on what is called Average Wholesale Prices (AWPs).

The Attorney General, on behalf of Louisiana taxpayers, alleges that the drug manufacturers deliberately reported false and inflated AWPs. “This is an egregious abuse of the Medicaid reimbursement system. We believe Louisiana has lost hundreds of millions of dollars as a result of these drug companies’ fraudulent pricing schemes,” Caldwell said.

Caldwell said the fraudulent pricing and marketing of prescriptions to the Medicaid program has impacted Louisiana taxpayers by causing Louisiana’s Medicaid program to grossly over-pay for prescriptions.

According to Louisiana’s lawsuit, the Louisiana Medicaid Program spent over $850 million for pharmaceutical drugs between 1991 through 2009. The lawsuit alleges that the price for a drug paid by the state, based on a fraudulently-reported Average Wholesale Price and other price indicators, often bears no relationship to the true price and can exceed 30% to 6000% of the true price.

The difference between the reimbursement amount and the acquisition cost is the “spread.” Caldwell explained that one of the reasons drug companies report false and inflated AWPs and other wholesale prices is to create a “spread” between the reimbursement amount Louisiana Medicaid pays (which is based on these reported prices) and the actual acquisition cost the pharmacy-provider pays to obtain the drug.

Caldwell said that the federal government and 27 other states have brought similar lawsuits that have resulted in multiple million dollar verdicts and settlements.

Louisiana’s petition was filed on October 28, in the Nineteenth Judicial District Court.  It accuses the defendants of violating the Louisiana Unfair Trade Practices and Consumer Protection Act, Louisiana’s Antitrust Statute, Louisiana’s Medical Assistance Programs Integrity law, fraud, negligent misrepresentation, and unjust enrichment.  The suit seeks recovery of all overpayments with interest as well as damages, fines, penalties, costs and attorney fees.