CLASS ACTION MEDICARE SUIT PASSES FINAL HURDLE ON WAY TO TRIAL

A class action claim alleging widespread Medicare fraud by the pharmaceutical industry was scheduled to go to trial Nov. 6 after a federal district court denied an industry motion to dismiss the suit.

The U.S. District Court for the District of Massachusetts will begin hearing allegations that several large pharmaceutical companies, including Johnson & Johnson, Schering-Plough and Bristol-Myers Squibb, defrauded consumers of hundreds of millions of dollars by routinely inflating the average wholesale price (AWP) they reported for certain drugs. The federal government supports the plaintiffs in In re Pharmaceutical Industry Average Wholesale Price Litigation, with the Department of Justice having filed an amicus brief on behalf of the HHS.

The plaintiffs include consumers, self-insured employers, health and welfare plans, health insurers and end payers for prescription drugs. The claim led GlaxoSmithKline to settle with the plaintiffs for more than $70 million.

The AWP is the amount manufacturers charge wholesalers for drugs, which is often used as a benchmark to set reimbursement rates for doctors and pharmacies that buy and dispense drugs.

The companies had asked the court to dismiss the claim, saying that AWP was a term of art that was only a reference price or benchmark used for price negotiations, rather than an average of actual prices. The court rejected that argument in its Nov. 2 order, instead focusing on the plain meaning of the term.

Congress intended a strict interpretation of the term, the court said. "The weight of the legislative history reflects congressional intent to have the AWP moored to the actual wholesale pricing and a nagging concern that AWP was no longer a reasonable price."