Consumer Groups Allege Pharmaceutical Companies Defrauded Medicare Patients

A coalition of 15 consumer groups filed a lawsuit Thursday alleging 28 pharmaceutical companies defrauded Medicare patients by inflating prices of drugs they sold to the government program.

The suit, which was filed in the U.S. District Court in Boston, estimates that Medicare and individual consumers were overcharged by more than $800 million in 2000. It is the third suit filed on behalf of consumers making similar allegations in the past month.

Drug companies post their average wholesale prices in lists used by the industry such as the REd Book and then give a discount to Medicare, a government program which provides health care to the elderly. The suit alleges the drug companies sold drugs to doctors at prices far less than the prices charged to Medicare. However, the government and Medicare patients paid the amount based on industry lists. Medicare only covers drugs dispensed in doctors offices and hospitals, and patients pay 20 percent of the cost.

The suit says, and it has been widely reported, that the Department of Justice, the Department of Health and Human Services and Congress have investigated pharmaceutical companies for defrauded Medicare. Some of the documents from those investigations are the basis for the lawsuit which has been shepherded by the Prescription Drug Access Litigation Project, a Boston-based umbrella organization for consumer groups which has lead 25 lawsuits against drug companies this year..

Earlier this year, Bayer Corp. and TAP Pharmaceutical Products Inc., a joint venture between Abbott Laboratories and Takeda Chemical Industries Ltd., each paid fines to settle charges they inflated prices to Medicare.

"This practice affects a particularly vulnerable population and it is clearly a systematic practice in the industry that needs to be addressed," said Tom Sobel, an attorney working for the Project.

The defendants include most of the major drug companies including Bristol-Myers Squibb, GlaxoSmithKline, Schering-Plough Corp. and Eli Lilly and Co.

A spokeswoman for the Pharmaceutical Research and Manufacturers of America, the industry trade group, would not comment on the suit.