Attorney General Lockyer Sues 39 Major Drug Companies for Inflating Prices, Bilking California Taxpayers

(LOS ANGELES) – Attorney General Bill Lockyer today took action against 39 pharmaceutical companies for defrauding California through a drug pricing scheme that has forced the state’s Medi-Cal program to pay artificially inflated rates, resulting in a loss of potentially hundreds of millions of dollars.

“We’re dragging these drug companies into the court of law because they’re gouging the public on basic life necessities,” Lockyer said. “This may be a bitter pill for the drug companies to swallow, but the days of prescription pricing fraud are over. We’re seeking immediate legal relief.”

In California, health care providers are reimbursed for drugs dispensed to Medi-Cal patients. The reimbursement rates are based on pricing data supplied by drug manufacturers. Lockyer’s suit alleges that the drug makers manipulated the prices, resulting in inflated costs to the state’s $34 billion Medi-Cal program, which provides essential health care to poor, elderly and disabled Californians.

“This scheme has cost California taxpayers potentially hundreds of millions of dollars, and is jeopardizing the public health by diverting money away from patient care. The amount of money that drug companies have cheated out of California could have been better spent on ensuring that every child in this state has access to health care,” said Lockyer.

Lockyer’s action was prompted by a whistleblower lawsuit filed in California by a small pharmacy, Ven-A-Care, alleging that these pharmaceutical manufacturers provided false and misleading drug pricing information that the Medi-Cal program relied upon to establish its drug payment rates.

An investigation by the Attorney General’s Bureau of Medi-Cal Fraud & Elder Abuse into Ven-A-Care’s allegations revealed extensive pricing manipulation that led to Lockyer filing legal action against two major drug manufacturers in 2003. Today, based on additional evidence gathered through ongoing investigations, Lockyer is filing an amended complaint expanding the original lawsuit by adding more than three dozen additional drug makers as defendants.

The lawsuit alleges that the defendants attempted to maximize profits by engaging in insidious sales schemes to increase market share. Specifically, they provided false and misleading information with full knowledge that the state would rely on their data in setting the amount of reimbursement for pharmaceutical products covered by the Medi-Cal program.

By defrauding the state into paying higher reimbursement rates, the drug makers created a financial incentive for drug dispensers (e.g., doctors, pharmacists, clinics) to utilize their products.

The lawsuit was filed in U.S. District Court in Boston, MA. It alleges that the defendants, for the purpose of capturing greater market control, knowingly caused the filing of false claims for reimbursement by the state. This is a violation of California’s False Claims Act, which provides up to treble damages and penalties of up to $10,000 per false claim.

A list of the defendants is attached. A copy of the complaint and additional information on the case may be found on the Attorney General’s website at www.ag.ca.gov .