GlaxoSmithKline PLC and its affiliate SmithKline Beecham Corp have come under fire from New York City, which has filed filed two law suits against the pharma giant, claiming that it was forced to pay unlawfully high Medicaid prices for two of the company's drugs.
The suits follow similar complaints filed by several US states, including Ohio, Texas and Montana, which accused big drug makers of defrauding their Medicaid programs by inflating drug prices.
The lawsuits were filed in Federal court in the Eastern District of Virginia and in Federal court in the Eastern District of Pennsylvania, alleging that the city was overcharged for the antidepressant Paxil and for the antibiotic Augmentin, the city said.
The city is seeking triple damages for what it claims were overcharges for the two drugs. A total amount has not yet been calculated, but it is likely to be millions of dollars, the city's law department said.
The city pays 25 per cent of Medicaid payments on behalf of New York City residents. In 2002 alone, the federal, state and local share of Medicaid payments for city residents for Paxil totaled $23.1 million, and $14.7 million for Augmentin.
In its lawsuits, the city claims that GlaxoSmithKline violated federal and state antitrust law, committed Medicaid fraud and took part in unfair and deceptive trade practices.
The complaints allege that the company filed frivolous patent infringement lawsuits against generic drug makers seeking to enter the market with lower-cost equivalent drugs in a pattern called "evergreening."
The city also filed a complaint in Manhattan Federal court on May 6 against The Purdue Pharma Co. and its affiliates for improper Medicaid charges, alleging similar violations of federal and state antitrust laws in its patents for the painkiller OxyContin.
In 2002, the federal, state and local share of Medicaid payments for OxyContin for city residents was $5.5 million. The city is also seeking triple damages for OxyContin overcharges.