Novartis to Pay $78 Million for Medicaid Fraud

Mike Ferrara

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An Alabama jury ruled this week that drug giant Novartis will have to pay over $78 million in damages for overcharging the state’s Medicaid health program for generic drugs.

Finding that Novartis had committed fraud, the jury awarded the state of Alabama $28.4 million in compensatory damages and $50 million in punitive damages.

This case marks the second time that Novartis has lost Alabama lawsuits over average wholesale prices (AWP), an industry price-reporting system that the company allegedly manipulated to increase its profits.

The companies are accused of posting AWP prices that were much higher than what doctors and pharmacists actually paid for drugs. They then “marketed the spread” to win business by encouraging physicians to seek reimbursement from state Medicaid programs at the full AWP price and pocket the difference, court documents show. -Cary O'Reilly, Bloomberg.com

Quite disturbingly, Novartis is only one of many companies who’ve been accused of manipulating the AWP to boost drug sales and increase profits, often at the expense of taxpayers. At least 27 states have filed AWP-related suits against drugmakers, and Alabama alone has secured more than $408 million in jury verdicts against Novartis, Glaxo and AstraZeneca (also recently in the spotlight for trying to keep company documents about the antipsychotic Seroquel, suspected to cause diabetes, weight gain, and other health problems, from being released to the public).

Litigation involving the unlawful and unethical manipulation of AWPs by Abbott Laboratories, Forest Laboratories Inc. and Watson Pharmaceuticals Inc. are scheduled to begin in Alabama on June 22.

Amgen Inc., Bayer AG, Bristol-Myers Squibb Co., Dey Inc., KV Pharmaceutical Co. and Takeda Pharmaceutical Co. have all settled AWP cases in Alabama.