From our colleagues at the Prescription Access Litigation Project (of Community Catalyst):
BOSTON, MA – Today, Prescription Access Litigation (PAL) and Hagens Berman Sobol Shapiro LLP announced a landmark victory in a prescription drug lawsuit brought by members of PAL and others. Judge Patti Saris, of the U.S. District Court for the District of Massachusetts, found that AstraZeneca (NYSE: AZN), Schering-Plough (NYSE: SGP) and Bristol-Myers Squibb (NYSE: BMY) violated the Massachusetts consumer protection act, Chapter 93A, by reporting false “Average Wholesale Prices” for a number of prescription drugs, including physician-administered drugs for cancer.
The “Average Wholesale Price,” or AWP, is a benchmark figure reported by drug manufacturers to commercial publications that publish compendia and electronic databases of prescription drug prices. Health plans, government health programs such as Medicaid and other “third party payors” use these AWP figures to determine how much to pay doctors and pharmacies for drugs which are given to their members and insureds.
The lawsuit is part of a much larger case, In re Pharmaceutical Industry Average Wholesale Price Litigation. Dozens of defendants, including the largest drug companies in the U.S., are alleged to have reported inflated and inaccurate AWPs for drugs covered by Medicare Part B, in order to increase sales of their drugs. Until 2003, Medicare reimbursed doctors for these drugs using a formula based on the AWP. However, the amount it cost doctors to purchase these drugs was much lower than the amount Medicare reimbursed them. Doctors profited from the difference, known as the “spread.” The defendants in this suit are alleged to have “marketed the spread” by artificially inflating the AWP so as to increase the amount the doctor would keep as profits by purchasing that company’s drug as opposed to a competitor’s.
Medicare Part B pays 80% of the cost of drugs that are administered in a doctor’s office as well as a small number of self-administered drugs, such as asthma drugs used with a nebulizer. The remaining 20% is paid by individual Medicare recipients or by supplemental insurance, known as “Medigap” plans. Today’s ruling benefits health plans and consumers in Massachusetts who paid part or all of that 20%, as well as health plans that paid for these drugs for patients not enrolled in Medicare.
“Today’s decision rights a great wrong that was done by these three companies against some of our society’s sickest and most vulnerable patients,” said Alex Sugerman-Brozan, director of Prescription Access Litigation. “What could be more outrageous than taking advantage of cancer patients in the name of profits?” One of PAL’s coalition members, Pipefitters Local 537 Trust Fund, is a plaintiff in the case.
The Court found that the three defendants caused the publication of false and inflated Average Wholesale Prices for seven drugs:
· Astra Zeneca: Zoladex
· Bristol Myers Squibb: Taxol, Vepesid, Cytoxan, Blenoxane and Rubex
· Schering-Plough (through its subsidiary, Warrick): albuterol sulfate“Prescription drugs are one of the fastest growing cost drivers in health care,” said John McDonough, Executive Director of Health Care For All, a Massachusetts advocacy group which is a member of the PAL coalition and a plaintiff in another part of the AWP case, “This decision puts drug companies on notice that they can’t get away with burdening the health care system by illegally and artificially increasing those costs.”
Although government programs (including Medicare Part B and Medicaid) are abandoning AWP, virtually all private health plans and insurers still use it. Today’s Court decision and a settlement in another lawsuit will help push these third party payors towards other benchmarks. In October 2006, a separate case brought by two PAL coalition members against First Databank, the main publisher of AWPs, was settled. In that settlement, First Databank agreed to roll back the AWP spreads on hundreds of drugs, and to stop publishing AWP data within two years of the settlement becoming final.
“This Court decision is yet another nail in the coffin of Average Wholesale Price,” said Sugerman-Brozan. “The day is long overdue for our health care system to pay for drugs based on real and accurate data, rather than on fictitious figures made up by drug companies that are more concerned about profits than patients.”
This summer, trials begin in another phase of this massive AWP litigation, with a trial set to begin in July against Bristol Myers Squibb on behalf of a nationwide class of individual Medicare beneficiaries. Steve Berman, lead attorney in the case and managing partner of Hagens Berman Sobol Shapiro LLP, said “We are looking forward to continuing the prosecution of this case against the remaining defendants who perpetrated similar if not identical wrongs against patients and insurers nationwide. We view this ruling as a big win that should serve notice to all defendants that they will be called to account for their wrongdoing.”
To view a copy of today’s decision, go to http://www.prescriptionaccess.org/docs/AWP-6-21-07-Order.pdf
Crime and Punishment: Enough for Corporate Wrongdoing?
Corporate crime should not be a new concept to many. However, it has evolved into more troubling ways- not only in regards to its severity, but the methods of deterrence now being implemented against corporations. So it may be becoming progressively worse for U.S. citizens as a result.
Rather than speak of all corporations, what will be discussed is government health care fraud. Fraud basically is deception with the potential to harm others. In the case of pharma companies, this may include improper promotion and marketing, meaning that such tactics are or may be deceptive misconduct that may be illegal. In addition, there are the crimes of kickbacks and lesser crimes of misbranding products. Probably more methods of wrongdoing as well do in fact exist and happen. Yet the point is that drug companies should not engage in such wrongdoing to enrich their faceless existence with profiting off those who are ill in illegal ways.
How is such conduct discovered? Typically by whistleblowers who worked for the described pharma company, and such people are rare for a number of reasons. The whistleblower then seeks legal agents and files what is called a qui tam false claims act with a district attorney’s office (Boston or Philadelphia, if you want prosecutors to take you seriously). After the case is filed, the whistleblower verbally acknowledges the charges and evidence to the chosen prosecutors and others.
Such cases usually take years for unclear reasons, yet in the past two years, the settlements from such cases has approached 2 billion dollars after investigations ended that took years, which is tax dollars returned to the American public with these settlements.
So, what has been happening once a pharma company is busted. Criminal indictment by the district prosecutor? Hardly, yet appropriate. Usually, the prosecutor’s objective is to dismiss the case, but give the impression that such activities will not be tolerated by our government. So Corporate Integrity Agreements are mandated to the pharma company, but not really taken seriously, as some have more than one of these agreements active still. It’s an invisible ankle bracelet. A pharma company can and have committed equal or worse crimes while under such an agreement. This Agreement is issued after the deferred or non prosecution agreement is sentenced to the law-breaking corporation, which basically is a pre-trial diversion. Essentialy, it’s just parole, which is supported by the DOJ and the administration. The criminals admit wrongdoing, but not guilt. And they pay a settlement in the neighborhood of hundreds of millions of dollars. Not that shocking, if you consider the income of big pharma companies. These agreements are relatively new and partially a result of suggestions from what was known as a Thompson memo, which basically was created by a DOJ guy as commandments for prosecuting corporations and variables to consider when doing so, which ultimately offered responses as to why a greater degree of punishment was not enforced.
We are one of three countries in the world with the most prisoners behind bars, yet those that do similar if not greater harm to others get out of jail free. Double standard, I would say. Is this behavior by our legal system towards corporations an effective deterrent? Most think not. It rather seems like tacit approval of their conduct. And health care fraud may be more damaging than other types in other industries, yet lack of regulation allows such crimes to continue.
Citizens should make the laws in our country. Justice would then finally exist. Utopic concept, but possible.
“Corporations cannot commit treason, nor be outlawed, nor excommunicated, for they have no souls.”
—- Edward Coke
Dan Abshear