California regulators named 39 new defendants Thursday in a lawsuit against U.S. pharmaceutical companies accused of inflating drug prices and costing state taxpayers hundreds of millions of dollars.
Among those named were drug giants Amgen Inc., Bristol-Myers Squibb Co., GlaxoSmithKline PLC, Novartis AG, Sandoz Inc., Mylan Laboratories Inc. and Schering-Plough Corp.
"We're going to drag these drug companies into courts of law because they've been gouging the public," California Attorney General Bill Lockyer said at a news conference. Lockyer said the state has estimated that each firm could be liable for as much as $40 million.
Representatives of Bristol-Myers Squibb, GlaxoSmithKline, Novartis and Sandoz, a Novartis subsidiary, said the firms followed the pricing guidelines under the law. A spokeswoman for Kenilworth, N.J.-based Schering-Plough said the company had yet to see the state's complaint and declined to comment.
Mary Klem, an Amgen spokeswoman, said the company was added to the suit because of claims filed against a subsidiary, Immunex Corp., before Amgen took it over. Mylan did not immediately return calls seeking comment.
Medi-Cal, California's version of Medicaid, spends about $3.5 billion a year on drug costs, or 10 percent of its $34 billion annual budget, Lockyer said. California law requires Medi-Cal to pay for drugs based on the average wholesale price.
The state initially sued Abbott Laboratories and Wyeth in 2003, accusing them of reporting false prices that California then used to set reimbursement rates for Medi-Cal.
An ongoing investigation led Lockyer to target the additional defendants. In the new complaint, the state claims the drug companies inflated the average wholesale price of many drugs, creating vast spreads between the cost paid by health care providers and the reimbursement rates they received from Medi-Cal.
The windfalls gave doctors, pharmacies and other providers an incentive to prescribe such drugs, which resulted in even more sales by drugmakers, Lockyer said.
California's lawsuit is combined with similar litigation from about a dozen other states that is pending in U.S. District Court in Boston. A final resolution could take years, Lockyer said.
Madison, N.J.-based Wyeth has since resolved the case, Lockyer said. Abbott, based in Abbott Park, Ill., was still listed as a defendant in the amended complaint filed Thursday. The company has denied any wrongdoing.