Attorney General: Attorney General Announces $70 Million Settlement With Glaxosmithkline For Inflating Cancer Drug Costs

Connecticut Attorney General's Office

Press Release

Attorney General Announces $70 Million Settlement With GlaxoSmithKline For Inflating Cancer Drug Costs

August 10, 2006

Attorney General Richard Blumenthal today announced a $70 million settlement with GlaxoSmithKline that will provide restitution to victims - including individual consumers and the state of Connecticut - of a decade-long company scheme to inflate the price of two cancer drugs. Four other states - New York, Nevada, Montana and Arizona - also joined in the settlement.

Connecticut will receive full restitution for losses to its Medicaid program, which amounted to about $200,000 of the $770,000 that it will receive. The remainder of the money provides funds for the state's penalty claims, as well as for other state medical assistance programs.

Blumenthal charged in a 2003 lawsuit that GlaxcoSmithKline reported inflated average wholesale prices for Zofran and Kytril, increasing the cost to the state's Medicaid program, which uses the figures to set reimbursement rates. The alleged fraud took place between 1993 and 2003.

"GlaxoSmithKline reported false prices in brazen scheme to soak taxpayers and patients," Blumenthal said. "The company profiteered at public and patient expense. This fraud is especially shameful because the company sought to increase sales by manipulating prices instead of competing honestly. This settlement provides Connecticut with full restitution and compensates patients and others for inflated co-payments.

"I will continue to vigorously pursue legal action against drug companies that defraud the state's Medicaid and other health care programs and harm consumers. Glaxo exploited the state Medicaid program to divert scarce public resources and fatten its bottom line. Thousands of victims will be eligible for restitution, and the state will be fully compensated."

At the same time GlaxoSmithKline reported artificially high prices to push up Medicaid reimbursement rates, it offered the drugs to physicians at a deep discount. As a result, the difference between what doctors paid for the drugs and their Medicaid reimbursement increased. The bigger margin induced doctors to prescribe more Zofran and Kytril, increasing the company's market share and profits.

Zofran and Kytril are used to treat sickness and nausea caused by cancer treatments and must be administered by a physician.

GlaxoSmithKline last year reached a separate $149 million settlement with the federal government for scheme's cost to the Medicare program, as well as the federal share of Medicaid.