Minnesota Joins List of States Suing Firms Over Drug Prices

By Russell Gold

The Wall Street Journal, June 19, 2002

Minnesota became the latest state to sue a pharmaceutical company for allegedly inflating prices, charging Pharmacia Corp. illegally raised the price the state paid for chemotherapy drugs.

The lawsuit, filed Tuesday in state court in Minneapolis, is part of a widening effort by states to rein in rising pharmaceutical prices. Minnesota prosecutors have visited colleagues in California, Florida and Texas to "exchange information and strategize" on this and similar cases in the works, says Minnesota Attorney General Mike Hatch.

One of the main topics at a meeting of state prosecutors that began Tuesday in Farmington, Pa., is tactics and possible cooperation in future lawsuits. Drug companies also are facing pressure from federal investigations and consumer-group lawsuits that contend companies have employed deceptive tactics to drive up prices.

The Minnesota lawsuit against the Peapack, N.J., company contends the state and its citizens paid too much for cancer-fighting drugs such as Adriamycin. For instance, in 2000, the suit alleges, Pharmacia reported an average wholesale price of $241.36 per dose for the drug, while it was selling the drug to oncologists for as little as $33.43. Adriamycin is generally administered by physicians during office visits, instead of being dispensed by a pharmacist.

The prescribing physician keeps the difference between reported and actual wholesale price, called the spread. By allegedly manipulating the reported price, the suit says, Pharmacia created an incentive for doctors to choose Adriamycin rather than other chemotherapy drugs. The result is the state allegedly overpaid for the drug through programs such as Medicaid, a state and federal health-care program for the poor and disabled. In addition, seniors who purchased the drug through Medicare, the federally funded program for seniors, also overpaid, the suit alleges.

Minnesota is seeking between $5 million and $10 million in reimbursements in addition to requiring drug companies to be subject to periodic price audits, a potentially significant development because drug companies are bitterly opposed to giving government officials access to competitive pricing strategies. He also says the additional lawsuits against other companies are likely this summer.

Pharmacia spokesman Paul Fitzhenry declined to comment, saying the company hadn't been served with the complaint. He did say the chemotherapy drugs listed in the lawsuit are no longer protected by patents and thus subject to competition from generic versions. The drugs represent a small fraction of company revenues or profits, he added.