Big Pharma has been getting it from all sides lately over drug pricing, with companies such as Valeant Pharmaceuticals ($VRX) taking most of the heat as lawmakers, presidential candidates and the public weigh in on the issue. But now Eli Lilly ($LLY) and Merck & Co. ($MRK) are joining Valeant in the hot seat as the U.S. Department of Justice (DOJ) probes the companies over how they report prices to government-funded drug programs.
The U.S. Attorney's Office for the Eastern District of Pennsylvania and the DOJ's civil division are asking Valeant and Lilly about how they calculate and report drug prices for the Medicaid rebate program, the companies revealed in recent SEC filings. Back in September, Valeant got a letter from the two offices for "potential violations of the False Claims Act" stemming from its treatment of service agreements with wholesalers when reporting prices to the Medicaid Drug Rebate Program. Biovail and Valeant merged in 2010, and the company still does some business under the Biovail name.
Valeant said it "intends to respond to the request" from the DOJ and U.S. Attorney's Office, but a company spokeswoman declined to comment to The Wall Street Journal beyond the filing.
Lilly is also in hot water, disclosing that it received a similar letter from the same offices, focusing on its service agreements with wholesalers related to Medicaid rebates. The company is "voluntarily responding to this request," it said in its filing. But Lilly maintains that "accounting practices related to average manufacturer prices and the Medicaid drug rebate program are correct," the Indianapolis-based drugmaker told the WSJ.
Merck got a separate request from the U.S. Attorney's Office for the Eastern District of Pennsylvania asking for information about contracting and pricing with "certain pharmacy benefit managers and Medicare Part D plans" for its asthma drug Dulera. The company is "cooperating with the investigation," it said in its filing.
Unlike its peers, Valeant is already embroiled in legal drama over pricing. Last month, the U.S. Attorney's Office for the District of Massachusetts and the U.S. Attorney's Office for the Southern District of New York slapped the company with subpoenas to turn over information about pricing decisions, patient assistance and financial support programs. The move came amid controversy over Valeant's price increases for two of its meds, Isuprel and Nitropress, which rang in at 525% and 212% each.
|U.S. Senator Claire McCaskill|
Congress and the Senate are also dropping the hammer on the Canadian pharma. Democrats in the House Committee on Oversight and Government Reform are petitioning Committee Chairman Jason Chaffetz to subpoena Valeant over price increases. And the committee recently formed an Affordable Drug Pricing Task Force to lay out "meaningful action to combat the skyrocketing costs of pharmaceuticals."
Earlier this month, the Senate Special Committee on Aging, led by member Sen. Claire McCaskill (D-MO), said it would investigate dramatic prices increases. The committee sent letters to Valeant, Turing Pharmaceuticals, Retrophin ($RTRX) and Rodelis Therapeutics requesting information and documents related to pricing. "We need to get to the bottom of why we're seeing huge spikes in drug prices that seemingly have no relationship to research and development costs," McCaskill said at the time.
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