Judge Plans to Narrow Scope of Fraud Suit Against Drug Firms

A federal judge in Boston has said she intends to narrow the scope of a consumer lawsuit that accuses the drug industry of racketeering and fraud in setting the prices on which Medicare payments are based.

Pfizer Inc., Merck & Co. and Johnson & Johnson would be dropped from the case entirely and only state fraud claims would remain against other companies under the May 13 ruling by U.S. District Court Judge Patti B. Saris. She gave consumers and union health plans 30 days to amend the complaint or the dismissals would take effect.

Medicare, the U.S. health insurance program for 40 million elderly and disabled Americans, spends billions of dollars each year on prescription drugs administered by doctors. State and federal agents are investigating companies’ pricing practices as spending on medicine rises more than 10% a year.

The government bases payments on average wholesale prices reported by drug makers to independent companies that publish the information. U.S. regulations don’t provide guidance on what prices to report.

In some cases, drug makers have reported prices 100-fold what doctors paid, boosting government reimbursements, according to Saris’ ruling.

The consumers and health plans claimed the drug makers, working with doctors and pharmacy benefit managers, were part of a racketeering enterprise that committed fraud. Saris said there was no evidence to support such a widespread scheme.

Milberg Weiss Bershad Hynes & Lerach, the New York law firm that represents many of the plaintiffs, couldn’t be reached for comment. Officials with Pfizer, Merck and Johnson & Johnson either couldn’t be reached or had no comment.