Massachusetts is suing drug makers for ripping off the state’s Medicaid program. But note carefully, they’re suing generic drugmakers. I thought generics were supposed to be cheap! The suit accuses the generic-makers of a familiar tactic. Selling the drugs to pharmacies at one price, charging Medicaid a higher price and kicking back (some of) the difference to the pharmacies to move around market share. It’s a little odd that virtually every generic maker was allegedly doing this–how can they all be buying market share at the pharmacy?
However, this does start to get at some of the underbelly issues of marketing drugs. It’s well known that doctors are marketed to extensively by pharma companies, and the definition of what’s a legitimate promotion and what’s a kick-back has been changing over time. It’s also well know that PBMs are paid extensive spiffs by pharma companies (called "rebates") to favor one brand over another. What’s not so well known is that pharma companies are also paying pharmacies to try to move share around within the formulary–a kind of counter-formulary trying to move scripts from the first-tier drug to the second tier . These programs are run (somewhat quietly) as part of the Rx point of dispensing messaging by the big transaction companies, like NDC, WebMD and Proxymed. It looks like a similar activity by the generic makers in Massachusetts may have stepped over the legal line.