A federal judge in Boston ruled last month that AstraZeneca, Bristol-Myers Squibb and Schering-Plough must pay damages for overcharging on certain drugs paid for by Medicare, pension funds, insurers and patients. The judge found the companies liable in a nationwide class action lawsuit over drugs administered by doctors. Claims were dismissed against Johnson & Johnson. The plaintiffs’ lawyers were given until August 1st to provide calculations of damages for the other companies. This was a typical “average wholesale price” case. The plaintiffs are seeking hundreds of millions of dollars in damages. In a 183-page opinion, the judge wrote:

The Medicare statute itself created a perverse incentive by pegging the nationwide reimbursement for billions of drug transactions a year to a price reported by the pharmaceutical industry, thus putting the proverbial pharmaceutical fox in charge of the reimbursement chicken coop. The different pharmaceutical companies unfairly took advantage of the system by setting sky-high prices with no relation to the marketplace.

The judge found that AstraZeneca, which is based in London, acted “unfairly and deceptively” by causing the publication of false and inflated average wholesale prices for its prostate cancer drug Zoladex, which exceeded doctors’ acquisition costs by as much as 169%. Bristol-Myers, of New York, caused the publication of false and inflated average wholesale prices for five drugs, including Taxol, which had spreads as high as 500%. Warrick, a subsidiary of Schering-Plough, which is based in Kenilworth, New Jersey, inflated average wholesale prices for its generic drug albuterol sulfate in a range of 100% to 800%. This is a most significant decision and one that will benefit our firm in the cases we are handling for several states.

Source: Bloomberg

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