Arizona is suing a British drug manufacturer on allegations it skirted laws that aim to cap prescription drug prices.
The issue involves a popular asthma medication made by GlaxoSmithKline.
The lawsuit filed in Maricopa County Superior Court contends GSK’s actions violate the Arizona Consumer Fraud Act and the Medicaid Prescription Drug Rebate Program.
The program requires companies to pay governments back if its prices rise faster than inflation.
GSK is accused of discontinuing the inhaler Flovent and replacing it with an identical generic version in order to circumvent the rebate.
Attorney General Kris Mayes said thousands of patients in Arizona suddenly lost insurance coverage for the drug and that retail prices increased.
The basis of the lawsuit is the Medicaid Prescription Drug Rebate Program created as part of budget legislation in 1990.
Under that program, Mayes said, a company that wants its drug covered under Medicaid must enter into an agreement with the Secretary of Health and Human Services saying it will rebate a specific portion of the Medicaid program for the drug to the state. And they, in turn, share the rebates with the federal government.
The rebate amount, set in statute, is computed in part based on a percentage of average manufactured price plus an inflationary component.
What's significant is that if a drug's price increases faster than inflation, the company has to rebate the difference to Medicaid.
Mayes said GSK raised prices "aggressively" on Flovent since it was first introduced in 2000 as a dry powder inhaler in 2000 and four years later as a prescription metered-dose inhaler.
And what that meant, she said, is that by 2023 if the company continued to sell Flovent at its most recent prices, it would have had to pay a rebate greater than its average manufactured price.
That, the attorney general said, was only exacerbated by a provision in the American Rescue Plan that became effective last year, eliminating the cap on how much in rebates a company would have to pay.
But rather than reduce the price or pay the rebates, Mayes said GSK discontinued Flovent and started selling an authorized generic version of the drug, fluticasone propionate, through its distributor.
"The authorized generic is the exact same drugs, without the 'Flovent' brand name,'' the lawsuit says.
The official price, said Mayes is "slightly lower" than what GSK was charging for Flovent when it was discontinued. But it is effectively higher for consumers because the company does not need to pay rebates on the "new" drug, making its more expensive for the insurers and pharmacy benefit managers who decide what drugs to offer.
