A drug maker and its subsidiary have agreed to pay Idaho more than $1.7 million to settle claims that they inflated the average wholesale prices they report for drugs, leading state and federal taxpayers to pay too much for Medicaid drugs.
Idaho Attorney General Lawrence Wasden said Bristol-Myers Squibb Co. of New York and Apothecon Inc., a wholly owned Bristol-Myers subsidiary, published misleading prices — a practice Wasden says is widespread.
“I applaud Bristol-Myers Squibb and Apothecon for stepping forward to resolve this dispute voluntarily,” Wasden said in a statement Tuesday.
“Where published prices are false or misleading, the taxpayers are significantly harmed by excessive Medicaid reimbursements. I hope that others in the industry will follow Bristol-Myers Squibb’s lead in order to eliminate unfair costs to Idaho taxpayers.”
The companies admitted no liability or wrongdoing.
Here’s how Wasden said the overcharges worked:
Idaho Medicaid provides health care services to low-income Idahoans. Patients on Medicaid obtain prescription drugs from pharmacies and hospitals. Idaho Medicaid is required by law to pay for the drugs by reimbursing pharmacies and hospitals at the “estimated acquisition cost” of the drug. Idaho Medicaid primarily uses “average wholesale prices,” as reported by drug manufacturers, to determine this amount.
If the manufacturer reports an inflated or false average wholesale price for a drug, taxpayers can pay too much for that drug through Medicaid reimbursements. For example, in 2003, Apothecon published an average wholesale price of $2.25 for a package of cytoxan, 25 mg. Wasden believes that a true average wholesale price was $1.41. Thus, a pharmacy that dispensed cytoxan to a Medicaid patient in 2003 would have paid $1.41 for a package of the drug. Medicaid, however, would have reimbursed the pharmacy using Apothecon’s published average wholesale price of $2.25.
Under the agreement, Bristol-Myers Squibb and Apothecon will provide certain pricing information to Idaho Medicaid and pay Idaho $1,738,719 for restitution and compensatory damages. The state will get $500,573 plus attorneys fees and costs. Because Idaho Medicaid is heavily funded by the federal government, the federal government will get the rest.
“Investigation by my office has revealed that the reported average wholesale price often is not related to the actual wholesale price paid for the drug and that reporting of inflated wholesale prices by drug manufacturers is prevalent in the industry,” Wasden said.
Wasden’s office filed an assurance of voluntary compliance in District Court in Ada County. The court has approved the agreement.
In addition to the average wholesale price claims, the agreement resolves other claims relating to off-label promotion, alleged anti-kickback violations, and other alleged price misrepresentations, Wasden said.