Big Pharma Begs the Supremes to Keep Its Taxpayer Ripoff a Secret

A bunch of drug companies including AstraZeneca and Merck are hoping to persuade the U.S. Supreme Court to allow them to continue ripping off taxpayers by charging higher prices for drugs at public health clinics than Medicaid allows.

OK, that's not exactly what they're asking -- their appeal turns on the technical issue of whether a common law right to sue attaches to third parties when a federally required contract is signed between two primary parties -- but it might as well be. The facts in the underlying case are yet another infuriating example of why healthcare costs in the U.S. only seem to go up: The clinics, funded by tax dollars, are literally not allowed to know how much the drugs they pay for cost because that information is "proprietary."

Overcharging public clinics for drugs (allegedly)
In the case, Santa Clara County, Calif., sued AstraZeneca (AZN), Merck (MRK), Bristol-Myers Squibb (BMY), GlaxoSmithKline (GSK), Pfizer (PFE), Takeda, Sanofi-Aventis (SNY), and Bayer (BAYRY), claiming they charged its clinics higher prices than those set for any company that wants to participate in the Medicaid system. The clinics serve poor and underinsured people. Medicaid sets ceilings on drug prices to ensure that taxpayers get more for their money than private companies do.

The system, on paper, has an advantage for everyone: Drug companies get guaranteed sales for their drugs; taxpayers get value for money; uninsured people get access to drugs; and rich people with private coverage don't have to get the diseases that the poor would spread if they had no access to healthcare. Win-win, as they say.

In the mid-2000s, however, the Office of the Inspector General within the Health and Human Services Department produced a series of reports that showed the clinics -- so called Section 340B facilities -- were being overcharged for drugs. The government spends $3.4 billion annually to buy drugs for 340B facilties, and the annual overcharge was between $61.1 million and $41.1 million a year, the clinics claimed.
Litigating in the dark
The clinics don't know exactly what the difference is between what they paid and what the law said they should have paid, because drug companies keep that a secret, claiming the law protects it as proprietary data, according to the suit:

Santa Clara, litigating in the dark, argues that as the drug companies only get their drugs paid for because they signed a Medicaid contract with the HHS, they should be be bound to give the county the prices set forth in that contract.

But the contract was signed between HHS and the companies, not Santa Clara, the companies argue. Thus Santa Clara is a third party -- and doesn't have a right to sue.

Sympathy at the Supreme Court
The Supremes, unsurprisingly, seem to be sympathizing with the need of companies to rook the federal government rather than the need of taxpayers, poor people, or the clinics that serve them:

... several members of the high court seemed to take a different view Wednesday during an hour-long oral argument, suggesting that pricing enforcement was the responsibility of the U.S. Department of Health and Human Services.

Related:

• How Pharma Bilked the Feds by Selling Vitamins as Prescription Drugs
• $5B: The Cost to the Taxpayer of Drug Company Pricing Fraud
• $928 for a Bag of Salt: How Drugmakers Rip Off Taxpayers
• Exclusive: How Abbott Labs Allegedly Got Medicaid to Pay $3.3M for Popsicles