State files suit against 12 drug manufacturers

Friday, Jan. 18, 2002 | 9:49 a.m.

CARSON CITY -- Attorney General Frankie Sue Del Papa has filed suit against 12 major drug manufacturers, accusing them of "reaping tens of millions of dollars in illegal profits" at the expense of national consumers and government agencies.

Named in the suit are Abbot Laboratories, Inc., Baxter Pharmaceutical Products, Inc., Bayer Corp, Bristol-Myers Squibb Company, Dey, GlaxoSmithKline Corp., Glaxo Wellcome, Inc; Pharmacia Corp., Pharmacia & Upjohn Co., SmithKline Beecham Corp., Tap Holdings, Inc., and Warrick Pharmaceuticals.

The 12 companies overcharged Nevada and its residents in a pricing scheme over a number of years, the civil lawsuit, filed in state District Court in Reno, alleges.

Del Papa alleges the firms violated the state's consumer protection, Medicaid fraud and racketeering laws.

She called the practice "outrageous" and said it has "unjustly enriched" the defendants. She expected other states to file similar suits.

Attempts to reach officials of the drug companies were unsuccessful. Bruce Lott, state coordinator for the trade group Pharmaceutical Research and Manufactures of America, said he had not seen the suit and did not comment.

Some of the companies are members of the organization, and Lott said he believed similar suits have been filed in Eastern states.

Tim Terry, chief of Nevada's Medicaid Fraud Unit, said the drug companies distribute average wholesale price information to publications such as Red Book or First Data Bank. These publishers then list the prices, and the state bases its payments on that wholesale drug price data.

In addition, payments by public employees' insurance programs are also based on the average wholesale cost, and pharmacies sell the drug to residents based on that price.

But Terry said these drug companies sell their products to hospitals, pharmacists and doctors' groups at prices that may be as much as 70 percent below the average wholesale price paid by the state.

For example, Dey Inc. and Warrick Pharmaceuticals Corp., pegged the price of the drug Albuterol, used for respiratory conditions, at 36 cents a dose to the state and other customers. The drug, however, was being sold for 11 cents a dose to others.

For the antibiotic Vancomycin, Terry said Abbot Laboratories Inc. set the average price at $68.77; the company sold the drug to other customers for $8.14.

The practice, he said, has been going on for years. Terry said the attorney general's office, after an investigation, last year convinced drug makers to roll back their prices to the state in May 2000.