Sandoz Overcharged Medicaid by 60,000% in $13B Pricing Scam, Says Judge

Last Updated Jan 28, 2010 2:47 PM EST

Novartis (NVS)' generics unit Sandoz overcharged Medicaid by 59,936 percent, according to a federal court ruling. That's not a typo: The alleged fraudulent overcharge was nearly sixty-thousand percent more than it should have been, according to complicated federal regulations that govern drug price reimbursement. (That means if Sandoz charged $1 for a pill, it told the government it cost $600.)

Novartis/Sandoz wasn't the only drug company draining the taxpayer's dime: Wyeth (now part of Pfizer (PFE)) overcharged by 17,421 percent and Mylan (MYL) overcharged by 33,641 percent, the ruling says. That overbilling came at a price, Judge Patti Saris (pictured) wrote:
Collectively, the New York Medicaid program paid in excess of $13 billion between 1997 and 2003 for the prescription drugs at issue in these lawsuits.
The case revolves around the "average wholesale price" at which the government reimburses doctors who prescribe drugs to patients. Companies are supposed to report the AWP to the government, which then reimburses the doctors at that price. However, in several rulings Saris has found that companies were inflating the AWP or reducing their actual prices, allowing doctors to keep the difference when Medicaid reimbursed them. In legal terms, that's an illegal kickback which ends up being paid for by the government. Saris ruled:
... actual acquisition costs as consistently above 50%, frequently over 100%, and sometimes over 1000%.
Here's the list of offenders and the amounts by which they overcharged the government:
  • Barr: 1,841%
  • Dey: 3,998%
  • Mylan: 33,641%
  • Ivax: 1,893%
  • Par: 13,486%
  • Purepac: 1,103%
  • Roxane: 206%
  • Sandoz: 59,936%
  • Schering-Warrick: 1,224%
  • Teva: 2,955%
  • Watson: 5,775%
  • Wyeth: 17,421%
Here are the nine drugs with inflated prices (the ruling does not match the drugs to the companies, unfortunately):
  • Albuterol .90 mcg inhaler
  • Albuterol .83 mg solution
  • Cefadroxil 500 mg capsule
  • Clonazepam .5 mg tablet
  • Enalapril Maleate 20 mg tablet
  • Isosorbide Mononitrate 60 mg tablet
  • Lorazepam 1 mg tablet
  • Metropolol 100 mg tablet
  • Ranitidine 150 mg tablet
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