Drug manufacturer GlaxoSmithKline has agreed to pay a total of $2.6 million to settle claims by the State of Idaho regarding the “average wholesale prices” reported for its drugs. Idaho Attorney General Lawrence Wasden reports that, with this settlement, the total recovery of 14 disputes with pharmaceutical companies concerning average wholesale prices is now over $20 million.
Idaho Medicaid, like other state Medicaid programs, reimburses drug companies for drugs supplied to Medicaid recipients. These reimbursements are calculated according to a formula set out by law. The law requires that Idaho Medicaid reimburse pharmacies according to the “estimated acquisition cost” of the medication. To calculate the “estimated acquisition cost,” Idaho Medicaid relies primarily on the “average wholesale price” reported by drug companies to determine the amount of the reimbursement.
When drug manufacturers report inflated average wholesale prices for their drugs, taxpayers pay too much because the Medicaid reimbursements are too high. For example, GlaxoSmithKline reported an average wholesale price of $2.012 for its Wellbutrin product in 2003. The AG’s office discovered that the actual average wholesale price of the product that year was $1.590. Because of the discrepancy between the reported and the actual price of the drug, Medicaid would have reimbursed drug companies for Wellbutrin at a price 27% higher than allowed by law.
While GlaxoSmithKline has not admitted any wrongdoing in the settlement, the $2.6 million is meant to reimburse Idaho taxpayers for the inflated prices Idaho Medicaid paid for medications because of the false reporting of average wholesale prices.
The Idaho AG’s office has been working hard to stop the reporting of false and inflated drug prices, and this settlement is another step toward wiping out this form of Medicaid fraud.
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