By Howard Fischer
Mail | X: @azcapmedia

PHOENIX — Arizona is suing a major drug maker, accusing it of gaming the system by simply renaming an asthma drug to allow it to increase its profits.

The lawsuit filed in Maricopa County Superior Court says GlaxoSmithKline stopped producing its Flovent medication last year.

But the company continues to make making the exact same chemical formula, this time as a generic equivalent. What that did, according to Attorney General Kris Mayes, is get around a federal Medicaid law designed to claw back excess charges when a company increases its price on certain drugs.

Mayes said the decision to discontinue Flovent and replace it with the generic — one not subject to the federal rebate — resulted in higher retail prices and thousands of patients in Arizona to suddenly lose insurance coverage for the drug.

“Children whose families could not afford the price of the authorized generic — well over $100 a month — have been forced to go without this critical drug,” the lawsuit states. “There has been a resultant increase in emergency room visits, and even deaths, from asthma.”

All that, said Mayes, violates the state’s Consumer Fraud Act. And she wants a judge to award the state a penalty of up to $10,000 for each “willful” violation — something she said occurs when a company knew or should have known that they were violating Arizona law.

There was no immediate comment from the company.

The basis of the lawsuit is the Medicaid Prescription Drug Rebate Program created as part of budget legislation in 1990.

Under that program, Mayes said, a company that wants its drug covered under Medicaid must enter into an agreement with the Secretary of Health and Human Services saying it will rebate a specific portion of the Medicaid program for the drug to the state. And they, in turn, share the rebates with the federal government.

The rebate amount, set in statute, is computed in part based on a percentage of average manufactured price plus an inflationary component.

What’s significant is that if a drug’s price increases faster than inflation, the company has to rebate the difference to Medicaid.

Mayes said GSK raised prices “aggressively” on Flovent since it was first introduced in 2000 as a dry powder inhaler in 2000 and four years later as a prescription metered-dose inhaler. What that meant, she said, is that by 2023 if the company continued to sell Flovent at its most recent prices, it would have had to pay a rebate greater than its average manufactured price.

That, the attorney general said, was only exacerbated by a provision in the American Rescue Plan that became effective last year, eliminating the cap on how much in rebates a company would have to pay.

Rather than reduce the price or pay the rebates, Mayes said GSK discontinued Flovent and started selling an authorized generic version of the drug, fluticasone propionate, through its distributor.

“The authorized generic is the exact same drugs, without the ‘Flovent’ brand name,” the lawsuit says.

The official price, said Mayes is “slightly lower’’ than what GSK was charging for Flovent when it was discontinued. But it is effectively higher for consumers because the company does not need to pay rebates on the “new” drug, making its more expensive for the insurers and pharmacy benefit managers who decide what drugs to offer.

Mayes said GSK is able to charge the price it wants — and not have to worry about rebates — because no one else can manufacture its own generic equivalent, something she attributed to the company’s “manipulation” of the patent system.

Under normal circumstances, a patent is good for only 20 years, after which others can enter the market with generic chemical equivalents. But Mayes said GSK got renewed patents, not by changing the formula but instead through what she called new “peripheral features such as methods of use and deliver devices.”

The result, she said, is GSK, which filed its first patent on a fluticasone inhaler in 1981, now has patents running through 2030. And Mayes said from 2014 to 2023, GSK increased the price of Flovent by 47%, making about $71 billion in profits.

All this, the lawsuit says, has had “predictable monetary and health consequences for consumers.”

“The Flovent Renaming Scheme has caused families to forego the medication needed to control their children’s asthma,” Mayes said.

She quoted from an article by three pediatricians in STAT, a newsletter that deals with medical issues, citing a doubling of hospital admissions in the Philadelphia area for intensive care for children with asthma. And they said that can be attributed to lack of access to basic medications, specifically, the discontinuance of Flovent and the lack of insurance coverage for its generic replacement.

Mayes said this is a problem here, quoting Dr. Rahal Chawla, a pediatric emergency room doctor at Banner Health Thunderbird Medical Center.

“We’ve had patients coming into the ER that are coming in from asthma attacks because they’re not taking their controller medication ... because either pharmacies don’t have it or the parents can’t afford it,” Chawla is quoted in the lawsuit.

As to the legal issues, Mayes said all that violates the Arizona Consumer Fraud Act, which covers deceptive or unfair practices in the sale or advertisement of any merchandise. And she said the drugs at issue fit the definition of “merchandise.”

“The Flovent Renaming Scheme, including the sales of the authorized generic, has substantial injured, and will continue to substantially injure, Arizona consumers and payors by forcing them to pay inflated prices for critical medication,” the lawsuit says. It also says GSK’S practice injures consumers by preventing them from being able to obtain, or easily obtain, appropriate asthma medication.

“Defendant’s actions demonstrate callous disregard for not only the rule of law, but also public health, safety and well-being,” Mayes said, saying all that was done willfully.