Feb. 1 - Merck & Co., Pfizer Inc. and seven other drug makers overcharged New York City and 42 New York counties for medicines and may be liable for damages on millions of dollars in drug sales, a federal judge ruled.
The companies, including Mylan Inc., units of Teva Pharmaceutical Industries Ltd. and Novartis AG, unlawfully obtained public funds for health-care providers by making false statements about prices of nine drugs, U.S. District Judge Patti Saris in Boston ruled yesterday.
The drug companies “attempted to obtain payment from public funds on behalf of providers by means of a materially false statement or representation,” Saris said in her order. “There is simply no evidence that defendants believed that the prices they reported were even true list prices.”
Experts for the New York governments testified that the spreads between prices the companies reported as “Wholesale Acquisition Costs” for medicines and actual acquisition costs were consistently above 50 percent, frequently more than 100 percent and sometimes more than 1,000 percent, records show.
“The defendants knew that the list prices they reported were fictitious list prices,” Saris said. Merck spokesman Ron Rogers said the New Jersey-based company is disappointed with the decision and is considering whether to appeal.
Merck’s Schering-Plough unit “and other defendants in no way benefited from these rates as they do not receive reimbursement from Medicaid,” Rogers said in an e-mailed statement . The company believes that its Warrick unit “complied with all applicable laws and regulations governing pharmaceutical pricing and reimbursement.”
The case is In re Pharmaceutical Industry Average Wholesale Price Litigation, MDL No. 1456, U.S. District Court, District of Massachusetts (Boston).
Though no estimates of financial loss have been released, Merck and Pfizer could be a stake for a large settlement to the state of New York and surrounding counties. These and other similarly large pharmaceutical companies may have predicted such losses luring in the near future.
On January 7, Merck CEO Dick Clark announced that the company will cut some 16,000 jobs as part of its merger with Schering-Plough. As shown in a filing with the New Jersey Department of Labor and Workforce Development, Merck will eliminate 500 jobs at the former Schering-Plough headquarters in Kenilworth, NJ. On the same website, Pfizer announced its plan to cut 400 positions at its Wyeth-based Monmouth facility.
The pharmaceutical industry job cuts don’t stop there. AstraZeneca PLC plans to ax 8,000 more jobs, or 12 percent of its work force, by 2014 to cut costs as it reported disappointing fourth quarter earnings. The Financial Times reports that GlaxoSmithKline (GSK) will announce this week -- when it reports quarterly earnings -- more than 3,000 job cuts. Johnson & Johnson (JNJ) announced 7,000 to 8,000 layoffs in November, adding to earlier 900 sales jobs cut.
Not only are these corporate giants overcharging residents of New York, but they are eliminating jobs in a closely neighboring New Jersey. With such large areas of the state affected by these inflated drug costs, Pfizer and Merck may be striking their previous employees twice if they live in one of those counties so close to the New Jersey plants.
Source: Business Week
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