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Griffo: Oneida County To Sue Drug Makers
Over Medicaid Prescription Overcharges

               Oneida County Executive Joseph A. Griffo today announced that Oneida County will file a lawsuit in Federal Court against major drug manufacturers, alleging that the defendants engaged in fraudulent and deceptive conduct resulting in millions of dollars of overcharges for which taxpayers had to foot the bill.

“ Oneida County is fighting back against the drug companies that are getting rich while we all go broke paying for Medicaid. Medicaid exists to provide basic health care to the poor, not to pick taxpayers’ pockets. The scheme that is inflating Medicaid costs is taking away money that our taxpayers need, and we are suing to get it back,” Griffo said. “Medicaid prescription costs in Oneida County have risen more than 85% in the past five years. With an annual county share of more than $11 million and an overall cost to taxpayers of about $45 million per year, we have the potential to recover millions of dollars in overcharges.”

Under the Medicaid formula, Oneida County and the state of New York each pay 25 percent of drug costs and the federal government pays the remaining 50 percent.

The lawsuit focuses on two majors areas:

·        Prescription-drug reimbursement under Medicaid is set by formulas based on the maximum allowable cost established for drugs. The maximum allowable cost for non-generic drugs is based on wholesale costs determined from information provided by manufacturers. Oneida County ’s lawsuit will allege that drug manufacturers report false and inflated wholesale price information, which serves as basis for reimbursement of Medicaid-covered drugs. Under Medicaid, as in many other arenas including private insurance, drugs are reimbursed based on AWP, which stands for Average Wholesale Price.  Drug companies themselves are responsible for establishing AWP.  The county’s lawsuit will further allege that they establish it at an entirely fictitious and inflated rate in order to create spreads between reimbursement and actual cost to providers and then market this spread to create demand for their drugs. 

·        The lawsuit also will allege that drug manufacturers fail to comply with the Federal Medicaid Rebate Statute.  Drug makers sign a contract with the federal government and promise to report their Best Prices for drugs and to pay rebates based on these Best Prices.  The suit will allege that drug companies do not comply with these requirements, and instead they overstate their Best Prices and otherwise do not abide their rebate obligations. As a result, the county will contend, Oneida County does not receive the full compliment of Medicaid rebates to which it is entitled.

“The end result of this is that taxpayers are forced to bear an unjust burden because Medicaid makes its payments based on the inflated prices,” Griffo said. “Because the system is broken, we have situations where the price for which Medicaid is billed is substantially above the prices that an average person pays at an Oneida County drug store”

Griffo noted three examples where the prices paid through Medicaid were far in excess of the retail prices charged in Oneida County .

·        Metformin Hydrochloride (brand name Glucophage), for which Medicaid was billed about $286,000 in 2003 according to state Health Department figures, was 42% above retail price.

·        Lorazepam (brand name Ativan), for which Medicaid was billed almost $92,000 in 2003 according to state Health Department figures, was between 66% and 72% above retail price, depending upon the dosage.

·        Enalapril Maleate (brand name Vasotec), for which Medicaid was billed about $74,000 in 2003 according to state Health Department figures, was 63% above retail price.

           “Multiply these three example of gouging by the hundreds of prescriptions filled by Medicaid recipients in Oneida County every year, and we have the potential to recover millions of dollars in damages,” Griffo said, adding that the suit Oneida County will be filing will include a claim under New York Social Services Law 145-b, which provides for mandatory treble damages.

The suit, which will be filed in the Northern District of New York Federal Court , will name a number of drug manufacturers, most of whom are well known to the general public.

          Griffo noted that other governments, including the States of Ohio, Connecticut, Texas, Pennsylvania and California, and in New York State, New York City and several other counties, have already initiated lawsuits against drug makers for similar actions.