State Says Drug Firms Defrauded Medi-Cal

State officials on Tuesday accused two major pharmaceutical companies of bilking the Medi-Cal program out of millions of dollars through “grossly excessive, unreasonable and unlawful” inflation of drug prices.

In announcing a lawsuit against Abbott Laboratories Inc. and Wyeth Pharmaceuticals Inc., Atty. Gen. Bill Lockyer said he also plans to take legal action against other drug companies for allegedly cheating California’s $27-billion health program for the poor.

Lockyer said fraud by pharmaceutical companies appears to be one reason that the drug tab for Medi-Cal doubled to $3 billion a year while the patient load shrank 15% from 1997 to 2001.

“This prescription drug pricing fraud took advantage of sick patients and cost California taxpayers tens of millions of dollars in unnecessary health-care costs,” Lockyer said in a statement.

The civil suit is the latest action authorities have taken to try to stem Medi-Cal fraud, which some estimate at more than $1 billion a year. In the last few years, the state and federal governments have filed criminal charges against about 700 people and companies. And now the program faces Gov. Gray Davis’ threat of a $167-million budget cut.

The reimbursements that Medi-Cal makes to health-care providers for prescription drugs are based on the average wholesale price reported by drug companies. And the state’s suit, filed in Los Angeles County Superior Court, alleges that Abbott and Wyeth grossly overstated wholesale prices for certain drugs, resulting in huge overpayments by the program.

In one case, the state alleges that Abbott charged as much as eight times as much as it should have for an antibiotic called Vancomycin -- $64.35 instead of $7.40

Wyeth spokesman Doug Petkus declined to comment, saying the company needed time to review the suit.

Abbott issued a statement saying, “This is another Average Wholesale Price lawsuit similar to others filed against our industry. Abbott has consistently complied with all pricing laws and regulations. Abbott has properly and lawfully provided information to the government and to the independent drug reporting services on which the government relies in settling reimbursements. We have a strong defense and intend to vigorously defend ourselves against these claims.”

The suit seeks damages of three times the amount of the alleged price inflation, plus civil penalties of up to $10,000 for each false claim.

Several such lawsuits have been filed separately and in collaboration by attorneys general across the nation, alleging that various drug companies have charged excessively high wholesale prices for drugs. In May, for example, Nevada sued 16 drug makers and biotechnology companies, including Amgen Inc. of Thousand Oaks and GlaxoSmithKline, alleging that the companies charged inflated prices for medicines.

California’s case piggybacks on a whistle-blower’s lawsuit brought by a Florida pharmacy in 1998.