Drugmakers’ Payments Draw Heat

Harris Meyer
BusinessWeek
December 4, 2009

[efoods]A $112 million settlement involving alleged drug kickbacks that the Justice Dept. announced with the nation’s largest nursing home pharmacy and a generic drug manufacturer on Nov. 3 is part of a wide-ranging investigation of suspected Medicaid fraud by the pharmaceutical industry. Critics say the continuing probe, which involves Johnson & Johnson (JNJ) and other major drugmakers, highlights what they describe as an industry practice of paying money to outfits that provide drugs to consumers, in return for preferential treatment.

Because those alleged payoffs have the effect of compromising patient care and driving up costs for government and private health insurers, cases like the settlement unsealed with Omnicare (OCR) in Covington, Ky., and IVAX Pharmaceuticals in Weston, Fla., could bolster opposition to the controversial deal the Obama Administration reached with the pharmaceutical industry to win its support for health-reform legislation. Many Democrats say the Administration should have asked for much bigger cost savings from drugmakers.

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