The companies allegedly bumped up the prices of their drugs bought for
Medicaid prescriptions from 1993 to 2006, resulting in the state overpaying for
medications for tens of thousands of patients.

In an extreme example, the Medicaid program paid $1,480 for an ulcer
medication that was available for $27.70.

“We’re committed to the integrity of our Medicaid program, to making sure
that the resources are there to help the neediest people in the state. We can’t
allow people to be stealing from us,” said Lillian Koller, director for the
Department of Human Services.

The settlements were made public Wednesday after state Circuit Judge Gary
Chang vacated a confidentiality order.

Similar lawsuits were filed in about 20 other states.

The largest share of the settlement comes from Merck & Co., the country’s
second-largest drug manufacturer, which will pay $28 million.

Merck spokesman Ron Rogers said the company acted in good faith and didn’t do
anything wrong.

“Settlement of the Hawaii case is in the best interests of the company
because it eliminates the uncertainty of ongoing litigation,” Rogers said.

The companies include AstraZeneca Pharmaceuticals,
GlaxoSmithKline PLC, Pfizer Inc., Johnson & Johnson, Novartis Pharmaceuticals, Bristol-Myers Squibb. All the companies
involved deny wrongdoing as part of their settlements.

“We haven’t admitted any liability but have settled to avoid the uncertainty
and expense of litigation,” said Mary Ann Rhyne, a spokeswoman for
GlaxoSmithKline.

The government paid for drugs based on the manufacturer’s figure for their
average wholesale price, which exceeded prices paid by pharmacies.

The cost of prescription drugs in Hawaii’s Medicaid program soared from $45
million in 1999 to $117 million in 2004.

The methods used to inflate drug prices went undetected until a small Florida
pharmacy filed a whistleblower lawsuit, Bennett said.

“The feds didn’t see it. We didn’t see it,” Bennett said. “Everybody that we
sued was doing it. We alleged that this was an industry practice.”

Attorneys’ fees paid to private firms contracted to represent the state
exceed $12 million, or 15 percent of the settlement amount. Litigation costs
amounted to $1.5 million.

About half of the nearly $69 million remaining — around $35 million — will go
into the state’s general budget, and the rest will compensate the federal
government for its share of the damages, Bennett said.

The state comes out ahead because its actual damages suffered were between
$20 million and $25 million.

Taxpayers were the ones ultimately cheated by the price gouging because their
federal and state levies fund Medicaid, Koller said.

The payment will give the state government more money and reduce the need to
raise taxes or further cut services.

The state is considering additional lawsuits against other companies involved
in related schemes, Bennett said.