NEWARK (CN) – Giant pharmaceutical companies are overcharging consumers more than $3 billion a year by paying undisclosed kickbacks to induce insured people to buy brand-name drugs rather than less-expensive alternatives, according to six RICO class actions filed this week in four federal courts.
The class actions: two in New Jersey, two in Philadelphia, and two in Brooklyn, make similar claims. The plaintiff unions and their pension plans claim: “Defendant has paid, and continues to pay, undisclosed kickbacks to privately insured individuals so that those health plan members choose defendant’s branded drugs … instead of less-expensive alternatives. Defendant knowingly caused health benefit providers to pay for more prescriptions of these drugs than they otherwise would have, and caused falsely inflated drug reimbursement rates to be reported to, and imposed on the members’ health benefit providers for these subsidized prescriptions.”
All citations in this article come from a 52-page complaint in Newark, Plumbers and Pipefitters Local 572 Health and Welfare Fund individually and on behalf of all others similarly situated v. Novartis Pharmaceuticals Corp.
The union claims Novartis paid “undisclosed kickbacks to privately insured individuals so that those health plan members choose defendant’s branded drugs, Diovan and Diovan HTC, instead of less-expensive therapeutic alternatives.”
The same plaintiff also sued Merck in Trenton, N.J., citing its brand-name drugs Janumet, Janumet XR, Januvia, Nasonex, Vytorin and Zetia.
The Philadelphia class actions were filed by the New England Carpenters Health and Welfare Fund against AstraZeneca (citing Crestor and Nexium) and GlaxoSmithKline (citing Avodart and Lovaza).
In the Brooklyn class actions, the American Federation of State, County and Municipal Employees District Council 37 Health & Security Plans; and the Sergeants Benevolent Association Health and Welfare Fund sued Amgen and Pfizer (citing Celebrex, Chantiz, Lipitor and Sensipar) and Bristol-Myers Squibb and Otsuka American (citing Abilify).
The Newark complaint states: “Branded drug manufacturers have attacked the private prescription drug co-pay system by subsidizing plan members’ co-pays in order to undermine cost-sharing arrangements between health benefit providers and those they insure. These co-pay subsidy programs reduce or eliminate individuals’ co-pays regardless of financial need. Whether characterized as coupons, rebates, subsidies, or kickbacks, these payments to plan members interfere with health plans’ cost-sharing provisions and intentionally influence prescription drug choices. The programs are designed, quite specifically, to reduce or eliminate privately-insured individuals’ personal payment obligations so that they choose the brand name drugs and their health benefit providers foot the bill.
“Although co-pay subsidy programs vary as to the drugs covered and the specific amount of the subsidy or rebate, all programs work the same way. Individuals enroll in drug specific programs online. Individuals provide basic information … and the drug company mails them a wallet-size card that includes instructions to pharmacists regarding how to process covered prescriptions. Some drug companies allow individuals to immediately print cards using their home computers.”
After presenting their card to the pharmacy, primary insurance information is entered and the pharmacists enter the co-pay card system information in the secondary insurance area.
“Information regarding the extent of the co-pay subsidy or rebate is similarly computed, but only after the patient’s primary insurance is processed (and billed).
“The pharmacist and PBM [pharmacy benefit manager] use the reimbursement benchmark, which the brand name drug company provides to the reporting agency, to calculate the usual charge (i.e., unreduced by the amount of the subsidy) to the health benefit insurer for the procurement of that prescription drug. The pharmacist and PBM do so without advising the insurer that, at the same time, the plan member’s personal cost share obligation is being picked up by the drug’s manufacturer. As a result, the private health benefit provider pays for the medication at its usual (but in fact now inflated) cost, and it does so without being told that the usual cost-share obligation has not been paid by the enrollee, but rather by the brand manufacturer.
“In effect, defendant bribes plan members to choose its branded drugs over less-expensive therapeutic alternatives in order to get the health benefit plan to pay for the bulk of the cost of its more expensive branded drugs. From the member’s perspective, the branded drug and therapeutic alternatives cost close to, if not exactly, the same amount. But the price of the health benefit plan’s share of the therapeutic alternative with the lower co-pay and the branded drug with the higher co-pay may differ by a factor of ten.” (Parentheses in complaint.)
The complaint adds: “A recent study estimated that these kickbacks will increase health benefit providers’ prescription drug costs by $32 billion over the next ten years. …
“For example, Illinois plans are expected to spend nearly $1.4 billion extra on prescription drug costs as a result of co-pay coupons or programs during that time; Florida, New York, California and Texas will spend an extra $2 billion each in the next decade as a result of the same programs.”
The Newark and Trenton classes seek damages for RICO violations and commercial bribery.
They are both represented by Lisa Rodriguez with Trujillo Rodriguez & Richards, of Haddonfield.
The Philadelphia plaintiffs are represented by Jeffrey Kodroff with Spector Roseman, as are the Brooklyn plaintiffs in the complaint against Amgen-Pfizer.
AFSCME is represented by Jason Zweig with Hagens Berman in its complaint against Bristol-Myers Squibb.