The state of California has filed a lawsuit against 39 drug makers for allegedly inflating prices. The California Attorney General's office claims that the practice has cost the state's medicaid program tens of millions of dollars.
The lawsuit alleges that companies such as Amgen, GlaxoSmithKline, Abbott Laboratories and Wyeth of hiding the true prices of their medications so that payments from Medi-Cal, the state's medical program for the poor, would be artificially kept inflated.
'We're dragging these drug companies into the court of law because they're gouging the public on basic life necessities,' California Attorney General Bill Lockyer explained.
This lawsuit was inspired by one by a small pharmacy called Ven-A-Care which alleged that pharmaceutical manufacturers provided them false and misleading pricing information.
The lawsuit alleges that by defrauding the state into paying higher reimbursement rates, the companies also encouraged doctors and pharmacists to use their particular products. As a result, price inflation helped get companies a larger share of the market for specific medications.
'Usually, prices go down when there is market competition, but our evidence is just the opposite,' Lockyer told Reuters.
Lockyer believes that each of the 39 companies named in the lawsuit could be liable for as much as $40 million to the California government alone.
Approximately 12 other states have already filed similar suits and they have been consolidated by the courts. A federal court in Boston is now scheduled to hear all of these cases. It is not clear when or even if the California suit will be incorporated into the pending cases from other states.
