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.

What do you think? Tell us in the comments below.


5 Comments On “How drug companies rip off taxpayers”

  1. Very easy to stop this kind of corporate behavior. Start jailing the CEOs who are responsible for the fraud committed by their companies.

  2. The responsibilities of drug manufacturer copyright holders should be spelled out in law/regulations and gross violators should have their copyright suspended or cancelled. Not anymore intense than prison sentences for criminal behavior.

  3. Another Practice is to stop making a Medicine at a specific Dosage , then
    Raise the Dosage and Charge upwards of 6X (6 Times) as much as the Smaller
    Dosage , putting recipients in the POVERTY…
    There Needs to be More Action Taken on these PHARMA Techniques of Deceit.
    Maybe we should try & Make our Own Pills, in the first place .

  4. It’s ironic that the link that got me to this page was found on a related article from AARP. AARP would like you to believe that they are an advocate for older Americans but I believe they have fallen far short of that objective and have become nothing more than a marketing tool.

    I have Medicare Part D through AARP which of course is United Healthcare. For years, I purchased insulin from Walmart at a reasonable price. In 2016, United Healthcare decided to drop the Walmart product from their formulary. I then purchased a three month supply of insulin from Publix, a United Healthcare preferred pharmacy. Publix billed United Healthcare EIGHTt times the price of the Walmart insulin and essentially wiped out my coverage for the year with a thirty day supply.

    Insurance companies, drug companies and pharmacies have become organized crime in America………..the NEW AMERICAN MAFIA.

  5. Mayrene Wooldridge

    I agree that transparency is a great first step and that what the Attorney General has proposed is exactly what is needed. I’m 72 years old and a widow with a limited income. My supplemental insurance has more than doubled since age 65. This fact, along with high drug prices, causes me great concern. Seems to me the drug companies and insurance companies may as well hold a gun to our backs and rob us as to continue with the price gouging they are practicing.

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