Drug companies inflated prices of prescription drugs by millions of dollars, causing state and federal governments to overpay for medicine prescribed for Medicaid recipients, a lawsuit filed by Attorney General Tom Miller on Tuesday alleged.
The lawsuit, filed in U.S. District Court, alleges that 79 drug companies intentionally deceived the state Medicaid program, which pays for medical care and drugs for the elderly and poor.
The lawsuit claims breach of contract, fraud, unjust enrichment and violations of federal Medicaid laws and the Iowa Consumer Fraud Act.
It asks the court to permanently stop the companies from inflating drug prices and to award the state punitive and compensatory damages. It also seeks reimbursement of any illegal profits from the alleged scheme and restitution for the overcharged amount.
Miller said it is too early to determine how much money Iowa stands to recover if the lawsuit is successful, but he hopes to recover millions of dollars.
The state of Texas recently settled a similar case with drug companies for $55 million, Miller said.
The state has contracted with the New York law firm of Kirby McInerney LLP because of its experience with cases against drug companies.
The lawsuit will likely be combined in Massachusetts federal court with similar cases filed in more than 20 other states, Miller said.
Iowa paid $1.6 billion for prescription drugs between 1992 and 2005 for Medicaid recipients, the lawsuit said.
About 63 percent of Medicaid funding comes from the federal government. The program is administered by the Iowa Department of Human Services.
"We allege in our lawsuit that the prescription drug companies ... didn't give the average price as required by law but went north of that and in some cases very far north of that," Miller said.
In one example, GlaxoSmithKline allegedly reported to the state an average wholesale price of $39.90 for a vial of Zantac, a drug used to treat stomach ulcers, when the company sold the drug to retail pharmacists for $9.80 - a 307 percent inflation.
Pfizer Inc. allegedly told the state its average wholesale price for the anxiety drug Alprazolam, also sold as Xanax, was $169.36 when it sold the same drug to pharmacists for $10.10, a 1,576 percent additional profit, Miller said.