Medicare Compliance & Reimbursement

New York Attorney General Eliot Spitzer joined a half dozen other states in suing drugmakers over one of the hottest compliance hot buttons of recent years: alleged meddling with the average wholesale price that governs Medicare and Medicaid reimbursement.

In lawsuits filed Feb. 13, Spitzer accused GlaxoSmithKline and Pharmacia of reporting an inflated AWP and using the difference between the reported price and the amount it actually charged doctors, pharmacists and other health care providers — the so-called “spread” — to induce practitioners to prescribe their drugs. Providers make out well under the practice, since they obtain the drugs relatively cheaply, and get reimbursed for them at the significantly higher, AWP-pegged price. Spitzer is expected to file a similar suit against Aventis in the near future.

A number of other states have filed similar lawsuits, including Nevada, Montana and California. The twist in the New York action, Spitzer says, is that the suits go after the drug companies with counts of commercial bribery and making false statements to government health plans, as well as consumer fraud.

State AGs aren’t the only ones fed up with the AWP system. The HHS Office of Inspector General has long bemoaned the fact that AWP pricing is out of step with actual acquisition costs, the General Accounting Office has raised concerns with the issue and Congress has worried over the matter — without, however, changing the statute that helps perpetuate the system.

“We are seeking restitution for consumers and the state, and new reforms that will help maintain the integrity of the doctor-patient relationship, by making sure that medical decisions are based on sound clinical guidelines, not on whether a manufacturer’s drug delivers higher compensation to a provider,” Spitzer maintains.

While the amount of damages the state is seeking hasn’t yet been tallied, it’s expected to be in the tens of millions of dollars.