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Pentagon Can Get Refund on Expensive Drugs

WASHINGTON (CN) - Drugmakers that overcharged the Pentagon for drugs provided to military beneficiaries must offer a refund, a federal judge ruled.

Defense Department beneficiaries receive pharmaceuticals through the TRICARE Pharmacy Benefits Program.

A section of the National Defense Authorization Act for Fiscal Year 2008 sets ceiling on prices manufacturers can charge for pharmaceuticals they sell to the Defense Department. The law, which reached a final rule in October 2010, requires drugmakers to refund the government for charges in excess of the ceiling after Jan. 28, 2008.

In a federal complaint, the Coalition for Common Sense in Government Procurement claimed that the Pentagon lacked authority to require refunds on transactions occurring before the promulgation of the rule.

U.S. District Judge John Bates disagreed Friday, saying drug companies must face the cold reality of charging more than the legal limit for drugs.

"NDAA-08, at its enactment, imposed a cold realty: DoD would no longer be paying more than [federal ceiling prices] for drugs, and manufacturers or some other party in the system would be out the difference," Bates wrote. "If the manufacturers or other parties to TRICARE wished to avoid that reality, their only choice over the limited period of time before the rule's enactment was to stop participating in the sale of pharmaceuticals in the commercial marketplace. (That no manufacturers have taken advantage of the removal provision suggests that this reality was not quite as cold as the coalition might suggest.)" (Parentheses in original.)

Bates said the Pentagon has the statutory authority to force manufacturers to refund amounts received both before and after 2008 that are in excess of the federal limits.

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