Numerous state Attorneys General have filed lawsuits against pharmaceutical companies for allegedly fraudulently inflating the "Average Wholesale Price" of prescription drugs that states pay for on behalf of Medicaid recipients. The "Average Wholesale Price" (AWP) is a benchmark that drug companies report to drug pricing publishers like First Databank, Inc. State Medicaid programs and private health plans use the AWP to determine how much to pay pharmacies for drugs. When a drug company inflates its products' AWPs, states end up overpaying pharmacies for drugs dispensed to their Medicaid recipients, state employees and others.
More than 20 states' Attorneys General have filed suit lawsuits, and there have been a number of settlements. The latest was announced on Friday, settling a suit that Missouri Attorney General Jay Nixon brought against Schering-Plough Corp. (NYSE:SGP), Warrick Pharmaceuticals, and Schering Corp. (the latter two are subsidiaries of Schering-Plough). Schering-Plough agreed to pay $31 million after a jury decided on Thursday October 30 to award $7.3 in compensatory damages. The jury had not yet made a decision on whether to award punitive damages, which can often be quite higher. Schering originally announced their intention to appeal the Jury's $7.3M award, but then on Friday announced that they decided to settle the case.
See the St. Louis Post-Dispatch article on the settlement.
Interestingly, back in August, the Post-Dispatch ran a somewhat amusing article reporting that the jury that was originally selected for the trial had to be dismissed after jurors began moaning and groaning about having been selected ("Jurors' moans prompt judge to dismiss panel in lawsuit" [no current link available]), which said:
The excuses usually begin before the jury is selected.But on Tuesday, jurors stepped forward to complain after they were selected for a closely watched Medicaid fraud trial.
The judge then delayed the lawsuit trial, which had already consumed a good deal of time and expense for several lawyers for Missouri and the pharmaceutical companies the state is suing.
After the jury was selected, some jurors indicated their reluctance to serve to Circuit Judge David L. Dowd, who had told them the trial might last two weeks. Other jurors just moaned as they moved towards the jury box and prepared to take an oath. Dowd then asked the jurors what was the matter. He then asked attorneys for a private conference. Both sides agreed that the trial — which had been set on the calendar 18 months ago — could not proceed with this panel.
In April 2006, Missouri settled another AWP fraud case, with Dey Pharmaceuticals, for $2.9M.
In February 2008, a jury ordered Astra Zeneca to pay the state of Alabama $40 million in compensatory damages and $175 million in punitive damages for inflating AWPs. The Judge later reduced the punitive damages to $120 million.
Several members of Prescription Access Litigation's coalition are plaintiffs in a massive national class action lawsuit that alleges that drug companies inflated the AWPs of injectable and other physician-administered drugs covered by Medicare Part B. There have been several settlements in that case: