Pennsylvania is suing 13 major pharmaceutical companies and subsidiaries, accusing them of inflating prices in an alleged scheme that cost the government, insurers and consumers hundreds of millions of dollars.
State Attorney General Jerry Pappert called the Commonwealth Court action filed Wednesday "the broadest effort to date to fight the problem" of price manipulation by drug companies trying to gain market share.
Pappert said the companies essentially have two prices: the actual price and the average wholesale price the companies say they charge. Pappert said pharmacies, doctors and other medical providers bill their customers -- government agencies, insurance companies and patients -- using the average wholesale price.
That price is often far higher than the actual price and the medical providers pocket the difference, Pappert said. The drug makers benefit by being able to capture a larger percentage of the market.
The financial incentive for providers to choose more expensive drugs turns the concept of open-market competition to keep prices low "on its head," Pappert said. "They compete to actually increase the cost of their products."
Named as defendants are TAP Pharmaceutical Products, AstraZeneca, Bayer AG, GlaxoSmithKline, Pfizer, Amgen, Schering-Plough Corp., Bristol-Myers Squibb Co., Johnson & Johnson, Baxter International, Aventis Pharmaceuticals, Boehringer Ingelheim Corp. and Dey, along with nine subsidiaries.
The suit claims the companies agreed to work together "to oppose and avoid efforts to reduce prescription drug costs and/or to change the way in which payers reimburse for prescription drugs, and that they would act to conceal and suppress their conduct to prevent detection by others."
Pappert is seeking an injunction against such practices, repayment of overcharges going back to 1991, civil penalties, punitive damages and costs.
If the lawsuit succeeds, he said, consumers who purchased artificially overpriced drugs would be eligible for rebates.
"What I hope is that at the end of the day the artificially inflated prices will come down to reality," he said at a news conference.
A spokeswoman for TAP in Lake Forest, Ill., Katherine Stueland, said she had not seen the lawsuit and could not comment on it directly, but she said the company has "always provided proper and lawful information to independent drug-price reporting services."
Court Rosen, spokesman for the Washington, D.C.-based Pharmaceutical Research and Manufacturers of America, whose membership includes most of the industry's largest companies, said federal antitrust regulations prohibited him from commenting about the suit because it involves pricing.