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State of California Suing 39 Drug Makers for Inflating Drug Prices

Aug 26, 2005 | According to California’s Attorney General, Bill Lockyer, the state’s Medicaid program was bilked out of hundreds of millions of dollars by drug makers that inflated their prices.

As the number of defendants in the federal lawsuit increased to 39, Lockyer has made it clear that he believes Medi-Cal, California’s health insurance program for the poor, elderly, and disabled was the victim of price gouging by these companies which provided false and misleading drug pricing information to the state.

By engaging in these practices and defrauding the state into paying inflated reimbursement rates, the drug companies created an artificial incentive for doctors and pharmacies to prescribe their products.

Under California’s False Claims Act, the companies could be liable for treble (triple) damages and penalties of up to $10,000 per false claim. This could expose each of the companies sued to liability awards of up to $40 million.

Several other states have already filed similar suits and they have been consolidated in the United States District Court in Boston. This litigation could also cause the federal government to step up its own ongoing investigations into the matter of price gouging.

All of this litigation stems from a 1998 whistleblower lawsuit filed by Ven-A-Care, a small pharmacy that alleged Medi-Cal had based its drug reimbursement rates on false and misleading (inflated) drug-pricing information provided by the pharmaceutical companies.

In 2003, the state intervened in the Ven-A-Care lawsuit and the case was removed from state court and consolidated with the federal litigation pending in Boston.

The companies being targeted by the lawsuit maintain that they did nothing wrong and were in full compliance with law and all applicable guidelines.

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