S.C. suing five drug companies

State claims taxpayers were defrauded of more than $40 million

By RODDIE A. BURRIS

rburris@thestate.com

South Carolina filed suit against five pharmaceutical companies Thursday, saying the firms defrauded taxpayers of more than $40 million in prescription drug overcharges.

Attorney General Henry McMaster said the drug companies intentionally inflated what is known as the average wholesale price for certain drugs in order to get larger government-financed reimbursements through Medicaid and the State Health Plan.

Those two programs — the largest health plans in the state — cover more than 1.1 million people and have processed more than $5 billion in prescriptions since 1997.

The average wholesale price is supposed to be the national average price pharmacies pay for a particular drug.

McMaster said the companies named in the suit billed Medicaid and the State Health Plan at higher prices than the pharmacies actually paid.

“It is a fraud,” McMaster said. “It is a system that has gone on for a long time. And in South Carolina, it is an unfair trade practice.”

The companies being sued include Abbott Laboratories Inc., Baxter International Inc., Dey L.P., Boehringer Ingelheim Roxane Inc., and Schering-Plough Corp.

McMaster said that the S.C. overcharges date to 1991 and that additional drug companies might be named in the suit, filed in 5th Circuit Court.

Twenty-one other states have filed similar actions. Texas Attorney General Greg Abbott’s office has said his state collected at least $64 million in similar Medicaid billing suits from some of these same drug companies, including Baxter, Boehringer Ingelheim Roxane, and Schering-Plough.

A suit against Abbott Laboratories was pending. Efforts to reach North Chicago, Ill.-based Abbott Laboratories were unsuccessful.

In June, a Baxter spokesman commented on the settlement with Texas by saying the company had been slow to provide required information to Texas officials, but had changed its practices.

Also, Texas medical officials said previously the drug companies’ fraudulent behavior caused them to change the way the state reimburses pharmacists and physicians.

McMaster said his office would turn prosecution of these cases over to a team of private attorneys and law firms, including the McCuthen firm in Columbia, Schmutz & Schmutz in Charleston, P. Jeffrey Archibald in Alabama, and Charles J. Barnhill Jr. in Wisconsin.

Most of the attorneys have made campaign contributions to McMaster, the attorney general acknowledged. He said the attorneys tipped his office off to the alleged fraudulent behavior, sparking a yearlong investigation by his office.

The attorneys will work on a contingency basis, receiving pay only if the lawsuits are successful, he said. The attorneys have agreed to work on what McMaster said is a conservative pay scale, limited to 4 percent of any judgment or settlement for more than $100 million, to 23 percent of any judgment or settlement for $5 million or less.

The case is the first one McMaster has contracted out to private attorneys, said Trey Walker, a spokesman for McMaster.

Former Attorney General Charlie Condon was criticized in 1998 for arrangements he made with private firms to sue tobacco companies. Members of those firms, who reaped $82.5 million in fees, included Condon associates.

Walker said the drug action launched Thursday is different because a contract controls potential fees upfront. Such a contract was not in place in the tobacco case.

Reach Burris at (803) 771-8398.