How drug companies rip off taxpayers
A recent news report from Minnesota sheds a light on a widespread and underhanded tactic that has been boosting drug company profits at the expense of taxpayers for years.
Drug companies aren’t supposed to charge government programs like Medicaid and Medicare more than private health care consumers. Patients in these programs are supposed to qualify for the lowest priced medications. In fact, there’s even an agreement with drug manufacturers to offset federal and state costs through rebates.
The government requires drug companies to report their lowest drug prices quarterly. Based on these reports, the companies pay rebates to state and federal programs. But because prices are self-reported, there are many opportunities for fraud.
Take the case of Wyeth Pharmaceuticals (now owned by Pfizer). Beginning in 2001, the company allegedly sold Protonix to hospitals at half the price it charged Medicaid—and knowingly concealed this fact when reporting to the government. This case was settled for earlier this year for a whopping $784.6 million.
Since 2010, Minnesota Attorney General Lori Swanson has been suing drug companies for this practice of inflating drug prices. She’s recovered $75 million.
But drug manufacturers don’t appear to be the only ones ripping off taxpayers. A federal appeals court just decided that a lawsuit alleging that Kmart pharmacy overcharged Medicare Part D patients as much as 30 times more than others will move forward. And similar suits are pending at other pharmacy chains across the country
Why are we allowing an industry so powerful to police itself? Right now, the only way we find out about instances of pharma fraud is if someone blows the whistle. The solution to this problem seems relatively simple: pricing transparency. Attorney General Swanson has called for a federal audit of drug pricing information. This seems like a common sense first step towards stemming abuses of the system that cost taxpayers hundreds of millions. Transparency could also have the ripple effect of driving down drug prices.
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