California Sues Big Drug Firms

The attorney general alleges the companies defrauded the state's Medicaid program.
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California's attorney general said Thursday he has sued 39 drug companies, alleging they defrauded the state's Medicaid program by making the state pay "artificially inflated rates" for drugs.

The suit, whose defendants include

Abbott

(ABT) - Get Report

, accuses the companies of violating the state's false claims act.

Attorney General Bill Lockyer didn't provide a precise figure in his charges against the companies, except to say, in a prepared statement, that their behavior could have lead to "potentially hundreds of millions of dollars" of losses to the state.

California spends $34 billion a year on Medi-Cal, the state's version of Medicaid, which provides assistance to poor, elderly and disabled residents.

Lockyer said the suit evolved from a 1998 action filed in California by a Florida pharmacy, alleging that drugmakers were providing inaccurate drug-price information to Medi-Cal so they could claim greater reimbursements. Lockyer's bureau of Medi-Cal Fraud & Elder Abuse began investigating the matter. In early 2003, Lockyer intervened in the pharmacy's suit vs. Abbott and Wyeth. Today's suit amends the complaint to add more defendants.

The suit was filed in a federal district court in Boston, where other Medicaid-related suits have been consolidated. Sixteen other states have filed similar suits.

Other defendants include

Amgen

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,

GlaxoSmithKline

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and

Schering-Plough

(SGP)

.