It's old but I bet you're still surprised
Public Hospital Claims Major Drug Manufacturers Overcharging Disabled and Homeless for Drugs
Report showing an estimated $500 million per year in excess drug prices spurs suit
July 13, 2004
Montgomery, Ala.-An Alabama public health hospital today filed a class-action lawsuit against some of the nation's largest pharmaceutical manufacturers including Merck (NYSE:MRK), Pfizer (NYSE: PFE) and Eli Lilly (NYSE:LLY), claiming the drug manufacturers have been systematically overcharging public hospitals and community health centers for drugs by as much as $500 million per year.
In a suit filed in U.S. District Court in Alabama, Central Alabama Comprehensive Healthcare Inc., an organization that provides care for the indigent, claims major drug manufacturers have charged prices far above the maximum allowed by a 1992 law designed to provide more healthcare access to the homeless, the disabled, children, and the poor.
The 1992 law requires drug companies to charge public hospitals and community health centers a price lower than prices paid by any other public or private purchaser. Although drug companies are required to give public hospitals the best price, they have steadfastly refused to disclose how they calculate prices, the suit notes.
The suit seeks to represent all public hospitals and community health centers nationwide that were allegedly overcharged by the drug companies.
"In our view, the defendants have been hiding the truth from the government and the hospitals for years," said Steve Berman, the attorney representing the public hospitals and community health centers. "We intend to prove that these drug companies have boosted their bottom line on the backs of the poor and disadvantaged."
The suit cites a recent report by the Office of the Inspector General for the U.S. Dept. of Health and Human Services that shows more than 97 percent of public hospitals paid prices above the legal limit for drugs during September 2002. According to the report:
* 31 percent of the items purchased by public hospitals and community health centers exceeded the maximum price allowed.
* 53 percent of the drugs sampled exceeded the maximum price at least once.
* Public hospitals overpaid an estimated $41.1 million.
"It's shocking to think about the number of people that didn't receive basic healthcare services because of budget shortfalls caused by this scheme," said Berman.
According the suit, the government organizations in charge of ensuring that hospitals are not overcharged suffer from inadequate funding for proper day-to-day oversight, much less investigation and prosecution of these alleged overcharges.
The suit asks the courts for a full accounting to determine the extent of the overcharging by drug companies, injunctive relief to prevent further overcharging, and relief from past overcharges.
