Utah Sues Drug Companies for Price Inflation

None by KCPW

(KCPW News) At least ten major drug companies have been overcharging Utah taxpayers millions of dollars in prescriptions for Medicaid patients, and now the state is taking those companies to court. State Assistant Attorney General David Stallard estimates Utah has overpaid about 300-million dollars to drug companies in the last ten years:

"The drug manufacturers were artificially inflating their 'list prices' which is what Medicaid bases its reimbursement on," says Stallard. "The reason they do that is it creates more profit for the pharmacies, so they pharmacy will use their drug instead of the competing manufacturer's drug."

Stallard says Utah is the 26th state to sue drug companies for overcharging Medicaid using what he calls a widespread "scheme." Low-income and disabled Utahns who rely on state-funded Medicaid for health care have their prescriptions filled at a pharmacy. The state Medicaid system reimburses the pharmacy based on the price listed by a drug's maker. Pharmaceutical companies argue the government knew the prices were inflated, but continued to pay them anyway. But Stallard says states don't have good access to price information:

"There is no feasible alternative in the system for Medicaid to set its prices," says Stallard. "The manufacturers knew the Medicaid programs were hostage to the system, so many of them chose to exploit it."

In one instance, Stallard says the average wholesale price listed by a pharmaceutical company was 500 times the actual cost of the drug. Price inflation appears particularly rampant for generic drugs, adds Stallard. Other states have won similar cases against the pharmaceutical industry.

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