Last week, the Obama administration surprisingly sided with pharmaceutical companies accused of overcharging public hospitals and clinics, the New York Times reports.
The administration told the Supreme Court that hospitals and clinics cannot sue drug companies for increased drug discounts or to obtain reimbursement from companies that overcharge. Oral arguments in the case are scheduled for Jan. 19.
Details on Drug Discounts
The case involves a suit filed by Santa Clara and Santa Cruz counties against AstraZeneca and other drugmakers.
A drug-discount program was created in 1992 as a way for federal officials to regulate agreements with drug companies and set maximum prices for drugs sold to certain health care providers, including:
- Children's hospitals;
- Community health centers;
- Family-planning clinics; and
- Safety-net hospitals.
More than 15,000 U.S. hospitals and clinics participate in the discount program, which slashes prescription drug prices by up to 50%.
According to the Times, the HHS inspector general says drug manufacturers have frequently overcharged providers across the last eight years but seldom have been punished by the government.
In a brief filed with the court, drug companies said that the rules for calculating prices and discounts were "exceedingly complex and technical."
Counties' Argument
The counties contend that drug companies overcharged for drugs supplied to safety-net hospitals and clinics and say that private lawsuits involving the drug-discount law "complement federal enforcement efforts," the Times reports.
Ted Slafsky, executive director of Safety Net Hospitals for Pharmaceutical Access -- which represents 600 hospitals in the program -- said that "manufacturers have been able to overcharge covered entities with impunity."
Justice Department Weighs In
In a friend-of-the-court brief, the Justice Department said that only the federal government has the power to enforce the drug-discount law.
The department also said that private lawsuits would interfere with that authority (Pear, New York Times, 1/9).