Iowa Sues 78 Drugmakers Over Medicaid Pricing

The state's attorney general, Tom Miller, charges the companies with inflating prices for Medicaid patients, which wound up costing the state millions of dollars over several years, The Sioux City Journal reports. Iowa follows the lead of more than 20 states that have filed similar lawsuits seeking to recover money they say was overpaid to drugmakers. Texas has recovered more than $55 million so far, according to Miller.

“It makes me angry that Iowa taxpayers are forced to pay more to finance record drug industry profits because the defendant drug companies do not honor their obligations under law to deal honestly with the government,” Miller tells the paper.

Iowa’s Medicaid program spent more than $1.6 billion for drugs from 1992 to 2005, the time covered by the lawsuit. Miller doesn’t know how much money the state might have overpaid, but he says the price of drugs paid by Iowa, which is based on an average wholesale price reported by the companies, ended up being far more than what was paid by retail pharmacists, the paper writes.

For example, Miller says Glaxo reported an average wholesale price of $39.90 for Zantac but sold the same drug to retail pharmacists for $9.80. Another example cited was the price for Xanax. Miller alleges Pfizer reported an average wholesale price of $169.36, but sold it to retail pharmacists for $10.10. "These are somewhat extreme examples, but they give you the idea that the price reported was not the price that should have been reported,” Miller he says.

Representatives for Glaxo and Pfizer didn't immediately return calls seeking comment.

Miller says pharmacists also ended up benefiting financially from the inflated prices for Medicaid drugs in the scheme. He alleges the drugmakers tried to increase the “spread” in cost and sales price for pharmacists to push sales for their products. But Miller didn't name pharmacists in the lawsuit because the false prices were reported by the drugmakers, among other reasons, the paper writes.

The 167-page complaint, filed in U.S. District Court in the Southern District of Iowa, accuses the companies of violating the federal Medicaid statute, breach of contract, violating the Iowa Consumer Fraud Act, fraud and unjust enrichment. Miller expects the case will likely be consolidated with other similar state lawsuits pending in federal court, according to the Journal. Iowa has hired a private law firm from New York to represent the state in the case because of its expertise in the area.