(CN) – A federal judge denied McKesson Corp.’s motion to dismiss civil racketeering and civil conspiracy claims made by the state of Utah. The state alleges McKesson conspired with First DataBank to inflate the cost of prescription drugs paid for by its Medicaid program.
Utah alleged conspiracy began in 2001, when “McKesson ‘stopped calculating its suggested sale prices according to the manufacturers’ historic markup and instead unilaterally adopted a higher markup.'”
The state contends First Data and McKesson conspired to “conceal the source of the AWP figures by effectuating price changes only when another wholesale acquisition cost-based price announcement was being made by a drug manufacturer.”
The scheme, according to Utah, raised the “mark-up to 25 percent for over 400 brand-name drugs that previously had received only the 20 percent mark-up amount.'”
In its lawsuit, Utah alleged McKesson had committed numerous wrongful acts including violations of RICO, RICO conspiracy, civil conspiracy, tortious interference with contract, and violations of the Utah False Claims Act.
But the firm argued the “statute of limitations on all of the claims has run, and that Utah failed to allege all of the required elements of its civil RICO claims.”
McKesson claimed that Utah’s civil racketeering claim only alleged a “‘single completed scheme, with a single purpose, based on a single core falsehood,’ and therefore has failed to allege a pattern of racketeering activity.”
U.S. District Court Judge Susan Ilston wrote that even if the “alleged activities of McKesson can be described as having one overarching goal, and as being fraudulent for one overarching reason, does not entitle McKesson to dismissal.”
Ilston continued that: “Utah has alleged facts supporting both but for and proximate causation: that its reimbursement rates for prescription drugs were directly tied to AWPs, that McKesson committed its alleged fraud in order to increase reimbursement rates ties to AWPs, that Utah continued to tie those reimbursement rates to AWPs based on McKesson’s alleged fraud, and that McKesson’s alleged fraud actually caused the AWPs to increase.”
“Utah sufficiently alleged that reimbursement rates rose due to McKesson’s “fraud – as opposed to any other factor,” Ilston added.
Ilston wrote that Utah may continue with its civil conspiracy and tortious interference with contract claims because Utah alleged that when First Data acknowledged in 2005 that it was no longer updating its AWPs with new survey data, “it continued to induce reliance on AWPs that were based on earlier figures-figures that had been fraudulently inflated-and continued to obscure the true source of the AWP data.”
Each time First Data republished AWP data, “before it rolled back price increases in September 2009, it was committing in overt act in furtherance of the conspiracy.”
Ilston also wrote that there is a lack of information if Utah’s claims of civil racketeering and violations of the Utah False Claims Act have run out under the statute of limitations.