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Whistleblower lawsuit accuses 3 drugmakers

AP Business Writer

TRENTON, N.J. (AP) – Three generic drugmakers are being accused in a whistleblower lawsuit of scheming to overcharge the government by tens of millions of dollars for medicines.

The U.S. Attorney’s office on Tuesday joined in the lawsuit, brought by Chicago pharmacist Bernard Lisitza.

His attorneys alleged in a 162-page complaint unsealed Tuesday afternoon that Par Pharmaceuticals Cos. Inc. of Woodcliff Lake, N.J., and two foreign generic drugmakers overcharged the Medicaid program by getting pharmacies to dispense different, more-expensive, dosage forms than what was prescribed.

Attorneys Michael Behn and Linda Wyetzner said the three companies got pharmacies to illegally switch from generic versions of Prozac and Zantac to Par’s more costly products so it could charge Medicaid more.

The other defendants are sister companies, Alphapharm PTY Ltd. of Australia and Canada’s Genpharm ULC, both accused of helping to run the scheme and manufacture or procure the medicines.

Assistant U.S. Attorney Linda Wawzenski of Chicago has joined in the case, but just against Par, according to spokesman Randall Samborn.

Behn said damages and penalties could exceed $300 million, given the triple damages allowed in whistleblower cases.

A spokesperson for Par did not return a call seeking comment.

All three companies have denied wrongdoing, according to the Behn & Wyetzner law firm.

The scheme centered on the fact that the Medicaid program had a price cap for what could be charged for capsules – but not tablets – of generic anti-anxiety drug Prozac, or fluoxetine. Likewise, Medicaid had a cap on the price for tablets, but not capsules, of generic heartburn medicine Zantac, or ranitidine.

Wyetzner told The Associated Press that Par and the other companies got drug stores, including Walgreen Co., to substitute the form without a price cap, charging two to five times the price for the capped dosage form. That gave the pharmacies a much higher reimbursement, while Par and the other two generic drugmakers cornered the market.

“What happened was, a prescription would come in for the capped dosage form of the drug, and a prescription would be filled for the non-capped dosage form,” Wyetzner said, adding that there were no generic Prozac tablets on the market until Par, Genpharm and Alphapharm began their scheme.

“They created them and they created a market for them. They made a fortune.”

Walgreen is not a defendant in the complaint, but in June 2008 it paid $35 million to the United States and 42 states to settle allegations it defrauded Medicaid by illegally switching dosage forms, according to the lawyers. Walgreen denied any wrongdoing.

According to the complaint, Par executives in 2000 made a presentation to Walgreen officials, explaining that by dispensing capsules of generic Zantac instead of tablets, Walgreen could make $65.75 per prescription, instead of $4.21. By filling an estimated 73 million prescriptions of that drug in a year, Walgreen’s could boost its profit to $80 million, from about $5 million, according to the complaint. Taxpayers paid the tab.

The lawsuit was originally filed in November 2006, in U.S. District Court in the Northern District of Illinois. It remained under seal while federal prosecutors reviewed Lisitza’s evidence, investigated and decided whether to join in the suit.

It seeks damages triple the amount the federal government was overcharged, plus the maximum damages allowed in states whose Medicaid programs allegedly were defrauded, and reimbursement of costs and “other relief” for Lisitza and the state and federal government plaintiffs.

Just last month, Florida’s attorney general announced an agreement with Par Pharmaceuticals over accusations it inflated prices for medications billed to Medicaid. The federal government, four states and a Florida pharmacy company that blew the whistle will share a $154 million settlement.

Lisitza has participated in other whistleblower cases, helping to recover more than $120 million for federal and state governments in Medicaid fraud. Those cases brought settlements of $50 million from nursing home pharmacy Omnicare Inc., $37 million from drugstore chain CVS Caremark Corp. and $35 million from Walgreen, according to the law firm.

Under federal and state False Claims Acts, private citizens aware of fraud can bring cases that help the government recover illegal gains and additional civilian penalties. Those whistleblowers are entitled to part of what the government recovers, usually 15 percent to 30 percent.

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