Eliot Spitzer scored another hit in his newest target for reform – prescription drugs – by accusing a pharmacy-benefits giant of skimming $100 million from retirees.
A lawsuit filed yesterday by the crusading New York Attorney General said that the No. 3 pharmacy-benefits manager, Express Scripts, fraudulently pocketed up to $100 million in drug savings for itself instead of turning it over to the client – in this case, the retirees of New York State.
“They were simply committing fraud,” Spitzer said. “It’s an ugly word.”
It’s the third legal action Spitzer has lobbed against the pharmaceutical industry in the past three months. Health care is a hot-button issue to most elderly voters, who could be casting ballots in Spitzer’s expected run for governor.
Spitzer earlier began a probe of Johnson & Johnson’s clinical trials of six new drugs. He also alleged that GlaxoSmithKline covered up negative information on the effects of antidepressant Paxil on children.
Express Scripts is also under fire from other states over its business practices. The company announced it received a subpoena from Vermont requesting documents on a wide range of Express Scripts’ business practices, and said it had been advised to expect identical subpoenas or inquiries from attorneys general in 18 other states.
The company denied any wrongdoing, and said that it has saved New York civil service employees about $2 billion in their prescription costs since 1998.
The company collects $600,000 a year from New York state to help keep drug costs down for its retirees. Last year, it renewed its five-year contract with the state as the sole bidder.
Spitzer and state Civil Service Commissioner Daniel Wall said Express Scripts did its job in getting rebates from drug companies but improperly kept large chunks of the rebates by disguising them as administrative fees and other billings.
Spitzer is demanding the company return as much as $100 million.
He also accused Express Scripts of inflating the cost of generic drugs and of using “fraud” and “deception” to induce physicians to switch patients’ prescriptions in exchange for a fee from the new drug supplier.
At least two other major drug benefits companies have been mired in controversies over their business practices.
State attorneys general around the U.S. have subpoenaed Caremark Rx, the No. 2 drug-benefit firm over its allegedly mishandling of rebate money. The largest drug-benefit firm, Medco Health, which formerly was a part of drug giant Merck, settled a massive fraud case three months ago, paying 20 states a total $29.3 million in connection with kickbacks it got from Merck to use its drugs.
Express Scripts shares tumbled 2.1 percent, or $1.34, to $62.51. Investors also dumped other drug-benefits firms, with Caremark Rx down 3.5 percent to $29.21, and MIM Corp. down 2.9 percent to $7.23. Medco was up 2 percent to $30.69.