Courier Journal: Jack Conway accuses drug distributor of conspiring with data company to inflate Medicaid reimbursements

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July 25, 2011

FRANKFORT, Ky. – Attorney General Jack Conway alleged in a lawsuit Monday that drug wholesaler McKesson Corp. conspired with a price data service to illegally inflate the drug reimbursements paid out through state Medicaid.

McKesson — the largest drug distributor nationwide — plotted with First DataBank to distort pricing information on more than 1,800 brand-name prescription drugs over the past decade, the suit alleges.

The scheme allowed pharmacies to reap higher profits, but Medicaid made up the difference, overpaying for drugs by tens of millions of dollars, according to the Attorney General’s office.

“This office has repeatedly sent the message to prescription drug companies that we will not tolerate fraud and abuse in the Medicaid program,” Conway said in a news release.

He called Monday’s filing in Franklin Circuit Court “another signal of my continued commitment to enforcing the laws that protect Kentuckians.”

First DataBank compiles figures on wholesale drug prices, which Medicaid references to reimburse pharmacies after the drugs are sold to consumers. Medicaid bases its payments on the acquisition costs of drugs.

Conway’s suit says the fraud began in 2001, when McKesson asked First DataBank to inflate the prices it reported by 5 percentage points. The companies wanted to boost goodwill with retailers by spurring higher reimbursements while keeping the actual costs consistent, the suit claims.

The Attorney General’s office is alleging four violations of the state Consumer Protection Act, along with separate counts of Medicaid fraud, theft by deception, false advertising, common law fraud, negligent misrepresentation and civil conspiracy.

Spokeswoman Shelley Catharine Johnson said the Attorney General’s office is seeking an unspecified amount in damages and penalties against both firms.

Spokesmen for McKesson and First DataBank did not return telephone messages Monday.

Claims made in a lawsuit represent only one side of a case.

Reporter Mike Wynn can be reached at (502) 875-5136.