Transcript AG Title Page - Columbia Law School

THOMAS W. CORBETT, JR.
Attorney General
Pharma Conference
National State Attorney General Program
May 10-11, 2007
James A. Donahue, III
Chief Deputy Attorney General
Antitrust Section
The Zen of AWP
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How knowing what AWP is and
should be can provide
enlightenment
The Theory
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System needed to purchase drugs
while neither enriching, nor
impoverishing pharmacists
System had to provide efficiency
incentives
Needed replicatability
The Problems
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The Lake Wobegon Problem
The Surveys
Lying, Cheating and Stealing
The Lake Wobegon Problem
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Part 1: An average means that
someone is paying an above
average price for drugs and losing
money on a sale to a government
program
Part 2: Since AWP was first adopted
in the 1960s, the pharmacy
business has changed so that all
drugs stores are above average.
The Surveys
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Price are determined by surveys
conducted by private reporting
services
No one is required to be honest with
these services.
Think of the penalty you would face
if you answered a survey question
dishonestly.
Lying, Cheating and Stealing
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As the difference between AWP and
actual wholesale prices grew, an
opportunity arose to “market the
spread.”
Effect of marketing the spread is
reverse competition: Competition to
offer ever greater spreads which
mean higher prices.
Lying, Cheating Stealing Part II
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Differences between AWP and real
wholesale prices have grown across
the board.
Markups can be used for marketing,
rebates, detailing.
AWP is the major tool to limit
transparency in drug pricing.
The Bottom Line
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As Judge Stearns stated in rejecting
a similar argument, “The suggestion
that Congress would deliberately
condone a bribery scheme using
public funds to enrich drug
manufacturers and physicians is, to
say the least, unusual.”
Pennsylvania’s AWP Lawsuit
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Filed in March 2004.
Now removed to MDL, Motion for
remand pending.
Allege fraudent pricing on 319
drugs by 37 defendant drug
company defendants.
Involves both doctor dispensed and
pharmacist dispensed drugs.
The Future of AWP
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Various other average pricing
guides
My favorite: Competitive Bidding
Role of Attorneys General
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Recover Damages for State
Agencies
Recover Damages for Consumers
Obtain industry Reform
Perform Law Enforcement Role:
Deterence