For Immediate Release
Media Contact: Bob Cooper
(208) 334-4112

Date: November 14, 2006

Wasden Reaches Million Dollar Medicaid Reimbursement Settlement

(Boise) – Drug manufacturers Dey, Inc. and Dey, L.P. have agreed to pay the State of Idaho more than one million dollars in a settlement resolving claims relating to the marketing and selling of prescription drugs and Dey’s reporting of “average wholesale price,” Attorney General Lawrence Wasden said.

Dey, located in Napa, California, develops, manufactures and markets prescription drugs for the treatment of respiratory diseases and respiratory related allergies. The company’s products include Accuneb, Albuterol and Epipen.

“I applaud Dey for stepping forward to resolve this dispute voluntarily,” Attorney General Wasden said. “Where published prices are false or misleading, the taxpayers are significantly harmed by excessive Medicaid reimbursements. I hope that others in the industry will follow Dey’s lead in order to eliminate unfair costs to Idaho taxpayers.”

Under the agreement, Dey voluntarily agreed to provide certain confidential pricing information to Idaho Medicaid and to pay the State of Idaho $1,072,700 for restitution and compensatory damages, the Attorney General’s fees and costs. Dey did not admit any liability or wrongdoing. The settlement agreement has been approved by Fourth District Judge Cheri Copsey.

Idaho Medicaid uses average wholesale prices as a basis for the reimbursement of the cost of pharmaceutical products. Idaho Medicaid is a program, administered by the Idaho Department of Health and Welfare, which provides health care services to low-income Idahoans. Inflated or false average wholesale prices can result in taxpayers, through Medicaid, paying more for pharmaceutical products than they should.

For example, in 2005, Dey published an average wholesale price of $10.08 for a package of Albuterol. The Attorney General believes that a true average wholesale price was 93 cents a package. In the same year, Dey reported an average wholesale price of $42.24 for Ipratropium. The Attorney General believes the true average wholesale price was $3.16.

BACKGROUND

In fiscal year 2000, Idaho Medicaid reimbursed health care providers approximately $76 million for prescription drugs. In fiscal year 2005, the amount reimbursed exceeded $166 million, an increase of nearly 118%. The number of Idaho residents receiving Medicaid paid prescription drugs increased only 64%, comparing the same two fiscal years.

The average wholesale price for a drug is determined by the drug’s manufacturer and is a significant factor in determining the amount of money that Medicaid will pay for that drug. Investigation by Attorney General Wasden’s office, other state attorneys general and the U.S. Department of Justice has revealed that the reported average wholesale price frequently has little relationship to the actual price paid for the drug and that such practices are widespread in the prescription drug industry.

Drug companies do not profit directly from inflated average wholesale prices. Drug companies sell drugs to health care providers such as physicians, hospitals, pharmacies and long term care facilities. The providers dispense the drugs to Medicaid recipients. Medicaid then reimburses the provider for the drug, based upon the “average wholesale price” reported by the drug’s manufacturer.

For example, a pharmacy that dispensed Ipratropium to a Medicaid patient would have paid $3.16 for the drug. Medicaid would have reimbursed the pharmacy using the published average wholesale price of $42.24 as a basis for its reimbursement decision. The difference between the actual price paid by the provider and the average wholesale price often results in profit for the provider.

Drug companies benefit from inflated average wholesale prices by increasing the quantity of drugs they sell to providers. False average wholesale price reporting has the effect of increasing the profitability of an individual drug for the provider and stimulates demand for that drug, resulting in more sales for the drug company.

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