New York City Sues Drug Firms Over Medicaid Tab

New York filed a lawsuit against 44 pharmaceutical companies and their subsidiaries claiming that it was overcharged millions of dollars for drugs used in its Medicaid program, the city’s law department said Thursday.

The suit against the companies, which include GlaxoSmithKline and Johnson & Johnson, was filed late Wednesday in the U.S. District Court for the Southern District of New York.

The suit follows similar complaints filed by several states, including Ohio, Texas and Montana, that accused big drug makers of defrauding their Medicaid programs by inflating drug prices. Medicaid is the federal health insurance program for 44 million needy people in the United States.

The city is seeking to recover its 25% share of Medicaid payments made on behalf of residents, as well as triple damages from each company for the overcharges.

A total amount has not yet been calculated, but it is likely to be millions of dollars.

In 2003 alone, the federal, state and local share of Medicaid payments for prescription drugs, many of which are manufactured by the 44 companies, exceeded $2.3 billion.

New York City’s Medicaid payments, of which drug payments constitute a substantial share, reflect more than 13% of the entire city budget.

The lawsuit alleges that the companies inflated the average wholesale prices used to calculate Medicaid reimbursements for prescription drugs, and that the companies underpaid Medicaid rebates required under federal law.

Other companies named in the lawsuit include Abbott Laboratories, Bristol-Myers Squibb Co., Eli Lilly & Co. and Merck & Co.