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State sues wholesaler, pricing firm on drug costs


State attorneys sued two companies yesterday in a new round of litigation to recover money for what it says was a massive fraud scheme by pharmaceutical companies and others that cost the Medicaid program tens of millions of dollars.

The Circuit Court lawsuit was filed against McKesson Corp., wholesaler of the pharmaceutical prescription drugs, and First DataBank Inc., which compiles and publishes the drug prices.

The suit follows earlier litigation against 40 pharmaceutical giants and other drug manufacturing companies. The case ended last month with the state recovering more than $82 million from out-of-court settlements.

The state’s share of the settlement is estimated to be between $30 million and $40 million.

Yesterday’s suit alleges that the wholesaler and the drug-price company helped inflate the price of brand-name drugs that resulted in the state overpaying Medicaid providers.

The lawsuit did not disclose how much money it is seeking. Attorney General Mark Bennett said they believe it will be "substantial."

Like the first lawsuit, yesterday’s action seeks not only money for the amount of alleged Medicaid overpayments, but also punitive damages and civil penalties and fines.

The state pointed out that cost of prescription drugs in the Medicaid program increased to $117 million in 2004 from $45 million in 1999.

McKesson officials could not be reached for comment. Denise Apcar, First DataBank marketing communications manager, said to her knowledge the firm had not been served with the suit and would not comment.

The state’s lawsuit yesterday follows litigation involving similar allegations against McKesson and First DataBank on the mainland. McKesson agreed to pay $350 million in a class-action lawsuit in Massachusetts two years ago and $9 million to Connecticut’s Medicaid program earlier this year.

Rick Eichor, one of the attorneys representing the state, said the state is not involved in the Massachusetts case and yesterday’s suit is unrelated.

The state’s first lawsuit, filed four years ago, targeted the pharmaceutical companies and accused them of inflating prices that resulted in Medicaid overpayments. The current suit also alleged wholesaler McKesson and the company that published prices participated in a secret scheme starting in 2001 to inflate prices.

"We are bringing this second phase of this litigation as part of an ongoing effort to recover overcharges and restore transparency and fairness," Bennett said.

He called the first round of litigation against the drug manufacturers "very successful."

After paying attorney fees and other costs from the settlements, the remaining $68.7 million will be divided between the state and the federal government, which also pays for the Medicaid program.

Bennett said they are still negotiating with the federal government about the split. He said earlier the state’s share should be between $30 million to $40 million.

The attorney general’s office retained the Honolulu law firm and mainland firms that handled the first lawsuit to represent the state in yesterday’s suit.

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