Lockyer Plans Fraud Suit Against Drug Companies

California Atty. Gen. Bill Lockyer is expected to file suit today against dozens of pharmaceutical companies, accusing them of fraudulently inflating the cost of drugs billed to the state’s Medi-Cal program by hundreds of millions of dollars.

Lockyer’s lawsuit would amend an earlier complaint filed in 2003 against Abbott Laboratories Inc. and Wyeth Pharmaceuticals Inc. to include “dozens of major drug companies,” said Teresa Schilling, a spokeswoman for the attorney general. She declined to identify the companies to be named in the new suit.

“They gouged Medi-Cal,” she said, referring to the state’s $30-billion-a-year program for providing healthcare for the poor. “Once we started investigating the issue, it became clear how big the problem was.”

The expanded suit would probably be consolidated with an existing federal case in Boston involving similar complaints filed by officials in Florida, Illinois, Massachusetts, New York and 12 other states.

Lockyer’s original lawsuit accused Abbott, based in suburban Chicago, and Wyeth of Madison, N.J., of contributing to the soaring cost of drugs paid for by Medi-Cal. The state’s bill for drugs has more than doubled to more than $3 billion annually in the past decade, even though patient loads have declined by more than 15%.

Specifically, the attorney general accused Abbott and Wyeth of defrauding Medi-Cal by reporting excessively high prices for some drugs.

Those prices were used by Medi-Cal, the state’s version of the federal Medicaid program, to reimburse pharmacies and other dispensers at exaggerated rates.

In one instance cited in the 2003 lawsuit, Abbott reported a reimbursement price of $49.42 for one gram of Vancomycin, an intravenous antibiotic used to treat serious infections. It charged pharmacies and other dispensers only $8.06 for the same amount of the drug.

The pharmacies and other dispensers profited from the spread between the two prices.

Both Abbott and Wyeth have denied wrongdoing.

Lockyer’s amended complaint follows a five-year investigation and will address Medi-Cal fraud -- estimated to be as high as $1 billion a year -- on a far broader scale than the original court action, Schilling said.

The lawsuit should shed light on drug manufacturers’ practice of charging different prices to different government-run programs for the same drugs, said Michael Weinstein, president of the Los Angeles-based AIDS Healthcare Foundation.