AZ Loses $13M Zoladex Appeal in "Do the Math!" Case

Last Updated Sep 29, 2009 3:49 PM EDT

AstraZeneca lost a federal appeals court ruling and must pay $13 million in damages for manipulating the price of prostate cancer drug Zoladex. The case involved an AZ campaign to persuade doctors to over-bill the government for Zoladex. It urged, "DO THE MATH!" in letters that explained how using Zoladex was more profitable for docs than other cancer drugs. The case establishes that AZ "marketed the spread" on the average wholesale price of Zoladex -- a technical term meaning that it sold the drug to doctors for less than the price at which Medicare reimbursed them for it. The docs pocketed the difference and AZ enjoyed increased sales.

In doing so, AZ kept the price of Zoladex artificially high: "The spread on Zoladex exceeded 100% from 1998 forward," the ruling states.

AZ raised a number of technical arguments against a Massachusetts district judge Patti Saris' ruling of June 2007. The appeals court found none of them convincing.

The down-'n'-dirty details of what, exactly AZ's reps did to manipulate the price of Zoladex can be read in Saris' original ruling. Note that once the AWP system was abolished -- and spread marketing became illegal -- the cost of Zoladex, fell from $451.56 in 2002 to $226.48 in 2005. (Who says there aren't savings to be made in healthcare reform?) Here are some highlights regarding AZ and Zoldex digested from the original ruling by Saris:

... What was remarkable, though, was how few of the pharmaceutical witnesses at trial were concerned about the impact of an inflated AWP on old and sick people making co-payments based on a percentage of AWP. Indeed, from the vantage point of AstraZeneca's sales team, they were actually assisting patients because Zoladex was cheaper than Lupron in treating prostate cancer.

... The reported AWP for Zoladex, however, was drifting farther and farther away from the actual selling price of the drug. In 1995 the spread rose to over 40% and continued rising steadily to reach over 140% in 2002. During that year, the AWP for a 3.6 mg dose of Zoladex was $469.99, while the ASP was only $194.62. Despite understanding that patients and payors were paying for Zoladex based upon these inflated AWPs, AstraZeneca seemed unconcerned. Alan Milbauer, AstraZeneca's VP of Public Affairs, acknowledged that "yes, the reimbursements went up, but it was overall less cost to the health care system and less cost to the patient. So I actually felt good about that."

... Sales representatives sent a letter to potential accounts encouraging them to switch to Zoladex -- A section titled "DO THE MATH!" then explained exactly how to calculate the "Return to Practice."