GlaxoSmithKline Settles Claim of Inflating Prices on Cancer Drugs

GlaxoSmithKline Inc. has agreed to pay more than $41 million in restitution to end claims by more than 40 states that it inflated the prices of drugs used by cancer patients and others.

The settlement announced last Thursday with the U.S. Justice Department, National Association of Medicaid Fraud Control Units and New York Attorney General Eliot Spitzer will include more than $1.5 million in restitution to New York state’s Medicaid program for cancer drugs and $940,000 in connection with pricing of an antibiotic, Spitzer said.

With some state lawsuits still pending on behalf of consumers and government health plans, the company expects eventually to pay a total of $70 million, said Mary Anne Rhyne, spokeswoman for the British company. They include civil actions by the attorneys general of New York, California, Connecticut, Nevada, Montana and Arizona.

The cost will be covered by the company’s existing legal reserve, she said.

She said testimony showed states and health plans chose to use the company’s drugs at the set prices “although it has been widely known for years that (average wholesale price) exceeds the prices actually paid by physicians, pharmacies and others,” according to the company’s prepared statement.

“Nevertheless, GSK has agreed to settle the cases, without admitting wrongdoing, to put this historical matter behind it,” the company stated.

Connecticut Attorney General Richard Bluementhal called it a “brazen scheme.”

“The fraud is especially shameful because the company sought to increase sales my manipulating prices instead of competing honestly,” he said.

In a separate settlement of a private class action lawsuit, the drug company will also fund a $40 million restitution fund for the poor and needy who use the Medicaid health care system nationwide and New York’s Elderly Pharmaceutical Insurance Coverage plan, Spitzer said. That suit was settled in federal court in Boston.

“Our lawsuit helped stop a long-standing practice that inflated the cost of drugs for people suffering from cancer and cheated the Medicaid system” Spitzer said. “Today’s settlement provides significant restitution for consumers and the Medicaid program.”

Spitzer had accused the company of inflating average wholesale prices of drugs in the class “anti-emetics” that help patients overcome the nausea and other effects of chemotherapy to fight cancer. In turn, health plans and consumers overpaid and government health plans reimbursed drug stores and physicians based on the inflated prices. People on Medicare, the health plan for the elderly, also overpaid because they allegedly paid a percentage of the inflated prices, Spitzer said.

An inflated average wholesale price also allowed the company to market the drugs to health care providers as coming with a “spread” between the wholesale price and actual price that could be pocketed by doctors and others to choose the GlaxoSmithKline product, Spitzer said.

The company also paid the New York Attorney General’s Office $750,000 for the cost of the investigation.