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GlaxoSmithKline

GlaxoSmithKline settles price fraud lawsuit with 40 states

Friday, August 11, 2006 by: NewsTarget
Tags: GlaxoSmithKline, drug racket, pharmaceutical companies

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(NewsTarget) Drug maker GlaxoSmithKline has agreed to pay more than $41 million to settle a class-action lawsuit brought by more than 40 states alleging the company inflated the prices of cancer drugs and other pharmaceuticals.

The U.S. Justice Department, the National Association of Medicaid Fraud Control Units and New York Attorney General Eliot Spitzer announced yesterday that GlaxoSmithKline would pay about $1.5 million to New York's Medicaid program, $940,000 for allegedly over-pricing an antibiotic, as well as $750,000 to Spitzer's office for the cost of the investigation.

GlaxoSmithKline spokeswoman Mary Anne Rhyne says the company has settled the case "without admitting wrongdoing, to put this historical matter behind it," and claims that testimony showed that states and health plans chose to buy the company's drugs at its set prices, "although it has been widely known for years that (average wholesale price) exceeds the prices actually paid by physicians, pharmacies and others." The company expects to shell out a total of $70 million, which will be covered by its existing legal reserve, Rhyne says.

The settlement includes restitutions that will be paid to New York, California, Connecticut, Nevada, Montana and Arizona, as well as a $40 million fund for the needy and poor who use Medicaid and New York's Elderly Pharmaceutical Insurance Coverage plan.

"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 on Thursday. "Today's settlement provides significant restitution for consumers and the Medicaid program."

Critics of pharmaceutical companies say that since GlaxoSmithKline admitted no wrongdoing by settling the cases brought against it, the company is allowed to remain on the list of approved drug companies that can continue selling pharmaceuticals to states, opening up more opportunities for wrongdoing in the future.

"Once again, we see that GlaxoSmithKline is able to buy its way out of a price fixing scheme that was, in my view, clearly fraudulent," said Mike Adams, a Big Pharma watchdog. "The message to pharmaceutical companies is clear: Defraud states and governments as long as you want, because even when you get caught, you'll never have to face any real consequences."

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