Pharmalot: How'd you get involved in this litigation? Stallard: I was working as an assistant attorney general for about five years and, most of that time, I was working in the Medicaid fraud control unit, spending a large part of my time, almost exclusively the last two years, on civil medicaid fraud, specifically, pharmaceutical fraud with respect to Medicaid.
Pharmalot: There's that much fraud? Stallard: There's a lot of fraud. These are pretty intensive cases and take a lot of time. My opinion it's because Medicaid drugs are such a huge part of the business for pharmaceutical companies and it's very attractive market - feeding at the taxpayer trough. I'm kind of a skeptic having worked in the trenches, but pharmaceutical companies try to get as much reimbursement as they can from Medicaid, because it's a big payer. And not just on price, but utilization. As many pills as they can, and the highest price they can engineer.
Pharmalot: Why did Utah sue Lilly? Stallard: Utah has chosen to sue on behalf of its state Medicaid program only two companies for what I call failure to warn - risks we allege were known early on by the company but concealed - Merck's Vioxx and Lilly's Zyprexa. In my opinion, there was a common theme. If they got what was going to be a blockbuster, they focus on the positives, but not give the FDA the negatives. And they would also train reps to dodge questions from docs. Separately, there was pricing fraud - overcharging medicaid - they falsely inflated list prices to First Databank and other compendia relied on by Medicaid and other third-party payors for medicaid reimbursement prices. But with Lilly specifically, there was a lot of off-label use that was promoted by Lilly improperly. It's actually illegal under Federal Food Drug & Cosmetic Act. But under state law, we're claiming Lilly improperly marketed the drug and caused us to pay more than we should have.
Pharmalot: But there was another issue raised, right? Stallard: Yes, and in fact, I wrote a memo that has to do with a second component - medically accepted indications for proper use. My legal analysis of federal Medicaid law is that, in order to be eligible for Medicaid reimbursement, the drug must be covered outpatient drugs. It's basically a threshhold requirement. There is a limitation on the definition of covered outpatient drugs that is tied to use of drug and it does not include 'a drug or biological used for a medical indication which is not a medically accepted indication.'
Pharmalot: So you're saying, under that definition, a state Medicaid program shouldn't be paying. Stallard: To me, it means that to be eligible for reimbursement for Medicaid - to be a covered outpatient drug - it has to be used for a medically accepted indication. Under that provision, it's not a covered outpatient drug unless its used for a medically accepted indication. It's not just a term of art. It's specifically defined in the federal statute. It has to be FDA approved for use or supported by specific compendia.
Pharmalot: But some state officials tell me a drug is covered because docs can prescribe off label. Stallard: That's a separate issue. Just because doctors prescribe, doesn't mean Medicaid can pay for it. In order to get federal funding, Medicaid programs must comply with federal law. It's not just indication - it's also dosage and age range of patients.
Pharmalot: Florida is an example where there's controversy over antipsychotics given kids with ADHD. Stallard: I think they shouldn't be experimenting when it's never been tested on children. It's a big mistake. Sometimes, legislators say they need to be liberal with vulnerable segments of society to give them medicines that may have some benefit. I turn it around and say we shouldn't be experimenting with the most vulnerable segments of our society. Pharmalot: But how does a state monitor every single doctor and prescription? Stallard: Legally, they should be monitoring. Practically speaking, I have to admit it'd be virtually impossible for a state Medicaid program to monitor this for every single drug. Some have prior authorization requirements. Most state Medicaid programs trust the chart. If something comes to their attention - a particular drug or class of drug - they may look at it more closely. I think it's true the states aren't doing this, and frankly, I sympathize with them because I agree it'd be a herculean task, but legally that seems to be what congress is saying. Pharmalot: So where does this leave us? Stallard: It should leave us here - state Medicaid programs should be aware of their costliest drugs and drugs known to cause serious adverse events and put them higher on the radar. And atypical antpsychotics meet both criteria - they're expensive and cause a lot of problems. With certain classes they probably ought to be doing that, and comply with federal law. Each state is going to have to decide. The Center for Medicare & Medicaid hasn't been much of a policeman enforcing the law. But states should enforce it with respect to the most troublesome drugs.