Bloomberg News

McKesson, Hearst Sued by Michigan Over Medicaid Drug Prices

June 06, 2011

(Updates with excerpt from complaint in fourth paragraph.)

June 6 (Bloomberg) -- McKesson Corp. and Hearst Corp. conspired to inflate average wholesale drug prices, causing the Michigan Medicaid program to overpay on pharmacy claims for eight years, the state attorney general said in a lawsuit.

The complaint, filed in state court in Lansing June 2, claims that McKesson, the largest U.S. drug distributor, entered into a secret agreement with Hearst, which publishes drug pricing data, to inflate prices on some drugs by 5 percent.

The state’s Medicaid program spent almost $2 billion on brand-name drugs over the eight years and about $80 million on generics, Michigan Attorney General Bill Schuette said in a statement today.

Hearst and McKesson “did not inform Michigan Medicaid of their scheme, did not inform Michigan Medicaid that the 5 percent increase did not reflect actual prices wholesalers charged in the marketplace and did not inform Michigan Medicaid why the 5 percent increase occurred,” the state said in its complaint.

Holly Weiss, spokeswoman for San Francisco-based McKesson, didn’t immediately return a call for comment. Debra Shriver, New York-based Hearst’s spokeswoman, had no immediate comment on the lawsuit.

The lawsuit is one of multiple cases around the U.S. alleging distributors and drug companies inflated average wholesale prices to boost the amounts paid by government programs and health insurers.

‘Steps to Hide’

Michigan, which claims McKesson and Hearst engaged in fraud and made multiple false claims to the state’s Medicaid program, is seeking reimbursement and additional civil penalties. The defendants “took numerous steps to hide their wrongdoing,” the state said in the complaint.

“It’s an insult to hard-working citizens when fraudulent practices cause their taxpayer dollars to be wasted or misused,” Schuette said in the statement released by his office today.

The case is Schuette v. McKesson Corp., 11-629-C2, Circuit Court, Ingham County, Michigan (Lansing).

--Editors: Andrew Dunn, Glenn Holdcraft

To contact the reporter on this story: Margaret Cronin Fisk in Southfield, Michigan, at mcfisk@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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