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Published on 22 June 2007

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Big pharma, big prices

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A US court has ruled that drug giants AstraZeneca, Bristol-Myers Squibb and Schering-Plough were guilty of grossly inflating the price of their treatments in order to unscrupulously take advantage of the former reimbursement system.

Judge Patti Saris in Boston, Massachusetts, found the three companies liable for extra costs piled onto patients and health insurers in Massachusetts as a result of their scheme to keep up the average wholesale price (AWP) of numerous drugs which from 1997 to 2003 were the basis for reimbursements from Medicare, state governments and private insurers.

The firms offered their treatments to doctors at steep discounts, but encouraged the doctors to say they had paid a higher wholesale price when claiming reimbursement from Medicare. Doctors would keep the difference and the companies kept AWP artificially.

Summing up, Ms Saris said that the Medicare statute created “a perverse incentive by pegging the nationwide reimbursement for billions of drug transactions a year to a price reported by the pharmaceutical industry”. This put the “pharmaceutical fox in charge of the reimbursement chicken coop”, she added.

The lawsuit was led by law firm Hagens Berman Sobol Shapiro. Managing partner Steve Berman said his clients are ecstatic that the judge found the defendants “unfairly and deceptively caused false AWPs to be published knowing that payers and the government did not understand the truth and the severity of the markups”. He said: “We are also grateful that she found the biggest victims were the patients who had to pay these outrageous prices out of pocket as a result of the defendants’ wrongful conduct.

“We found this case to be so disturbing because the pharmaceutical companies were running their business to benefit their bottom line, period,” Mr Berman added. “Because of the actions of these companies, patients who rely on these drugs, oftentimes to save their lives, have been critically injured through the grossly inflated prices.”

He said the worst culprit was B-MS, with a 1,131% markup on its chemotherapy drug Vepesid



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