Our firm has been hired by the State of South Carolina in the AWP litigation to assist in the prosecution of the state’s case. South Carolina Attorney General Henry McMaster has now filed a lawsuit against several pharmaceutical companies to recover over $40 million in taxpayer funds. In announcing the filing, the Attorney General stated that the named companies fraudulently manipulated the prices of Medicaid and State Health Plan prescription drug claims. South Carolina is seeking to reclaim those funds on behalf of the state’s taxpayers. South Carolina Medicaid and the State Health Plan are the largest two health plans in the state, covering over one million individuals. Interestingly, that represents almost 30% of the population of South Carolina. Together, the two plans have processed approximately $5 billion in taxpayer-funded prescriptions since 1997. After the Attorney General carefully investigated this matter, he discovered that his state had been cheated. The defendants named in South Carolina’s lawsuit are: Abbott Laboratories, Inc.; Baxter International, Inc. and its subsidiary Baxter Healthcare Corporation; Dey, L.P., formerly known as Dey Laboratories; Boehringer Ingelheim Roxane, Inc. and its subsidiaries Roxane Laboratories, Inc. and Ben Venue Laboratories, Inc.; and Schering-Plough Corporation and its subsidiaries Warrick Pharmaceuticals Corporation and Schering Corporation.

Since 1995, South Carolina Medicaid has spent over $300 million on prescription drugs from these companies. The State Health Plan of South Carolina alone has spent over $100 million. The pharmaceutical companies intentionally misreported the average wholesale price (AWP) of selected drugs which increased the reimbursements paid by Medicaid and the State Health Plans. This resulted in South Carolina taxpayers being overcharged to the tune of at least $40 million dollars and probably much more. When a patient fills a prescription at a pharmacy, the patient’s health plan reimburses the pharmacy for the cost of the drug based on the drug’s AWP. As we have reported previously, the AWP is a figure reported by the pharmaceutical company that has to be associated with the average price at which pharmacies buy their drugs.

False and inflated AWP figures for drugs provide greater financial incentives for pharmacies to buy and sell the drugs. Manipulating the average prices also provides higher sales revenue for the pharmaceutical companies, greater volume and market share for the drug companies and dramatically steeper drug costs for Medicaid and the State Health Plan. As in other states, taxpayers in South Carolina are the real victims of this pricing scheme. In bringing this lawsuit, the South Carolina Attorney General has two major objectives: First, South Carolina will seek to recover funds wrongfully taken from taxpayers over a period of years; and he hopes to restore public confidence in the stewardship of public funds.

Attorney General McMaster believes that the free enterprise system is strengthened when companies are held to high ethical standards. In this regard, he stated:

I believe in free enterprise. There’s nothing wrong with companies making a healthy profit. That’s the American way. But companies that conceal actual prices and manipulate records to improperly increase profits at the expense of taxpayers must be held accountable. One obligation of this office is to protect taxpayers from fraud. We take that obligation very seriously.

Currently, twenty-two other states have filed similar lawsuits alleging that a number of pharmaceutical companies knowingly inflating drug prices. Thus far, the Texas Attorney General has successfully recovered $55.1 million from many of the same companies named in South Carolina’s lawsuit. In related cases filed by the federal government, pharmaceutical companies have paid approximately $2 billion in criminal and civil liabilities. Our law firm was honored to be selected by the South Carolina Attorney General’s Office to assist the state in the handling of the case along with a team of private attorneys. Dee Miles, Clint Carter and I have been designated “special counsel” to the Attorney General and will be involved in the case from our firm. Our goal is to recover for the citizens of South Carolina that which the named defendants in the pharmaceutical industry have wrongfully taken from them.

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4. Drug Companies Try to Change Their Bad Image
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