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GLAXO INITIATES LEGAL ACTION AFTER CALIFORNIA MEDICAID DECISION

 RESEARCH TRIANGLE PARK, N.C., May 4 /PRNewswire/ -- Glaxo Inc. said today it has asked a California court to allow the state's Medicaid patients to continue receiving unrestricted access to its anti-ulcer drug, Zantac(R) (ranitidine hydrochloride), while the company attempts to open negotiations on whether the medicine will remain on the state's list of contract drugs for Medicaid patients.
 Under California's Medicaid program, called Medi-Cal, patients have unrestricted access to pharmaceuticals on the contract list. Prescription drugs not on the list are available only through prior authorization, which requires pharmacists to contact Medi-Cal officials for authorization before a non-listed medicine can be reimbursed.
 Glaxo, one of the nation's leading pharmaceutical firms, filed the lawsuit after California officials denied repeated requests to clarify the criteria they used to evaluate pharmaceutical companies' proposals in selecting which medicines would be reimbursed through Medi-Cal. In January, without negotiation or explanation, Medi-Cal notified Glaxo that Zantac would be removed from its list of contract drugs when the current contract expires on June 30,1993.
 "A medical issue is involved here," said Robert A. Ingram, Glaxo Inc.'s executive vice president. "We have a responsibility to the 30,000 Medi-Cal patients who have come to rely on Zantac. But there's also an issue of fairness in the selection process for the list of contract drugs, which suffers significantly if the rules governing the process are kept secret.
 "We're sensitive to California's budget problems, and we think only through full and complete negotiations can Medi-Cal be assured it is getting the best possible value on its medicines. Open negotiations are in its economic best interest, as well as the best interest of the Medi- Cal patients suffering from ulcers or other peptic-acid diseases."
 The lawsuit, filed in California Superior Court in Sacramento, contends that the state's Department of Health Services, as part of its therapeutic class review, failed to negotiate with Glaxo as required by state law, and that it improperly used undisclosed regulations in making its decision to delete Zantac from its list of contract drugs. The use of such "underground regulations" is prohibited by state law, which among other things requires public hearings describing the regulations and soliciting public input.
 The suit also takes issue with Medi-Cal's apparent use of an economic formula that in part evaluates the cost of drugs purchased by the state using a list of 11 companies that are referred to as "direct companies," implying that they sell directly to dispensers with no distribution through wholesalers. This list was first issued in 1979 but has not been updated to reflect the current market conditions of these companies. Use of the formula, revealed only after Glaxo had submitted its proposal, is irrational and arbitrary, giving an automatic price advantage to the so-called direct-sell companies -- even though they, like other companies, now distribute a majority of their products through wholesalers. This improperly discriminates against companies like Glaxo, the suit contends.
 In addition, the suit points out various other statutory and procedural deficiencies in the contracting process.
 Ingram noted that while the suit asks for an injunction to prevent the deletion of Zantac from the list of contract drugs after June 30, ultimately Glaxo seeks only the opportunity to make its case for Zantac with Medi-Cal officials in open negotiations.
 "If after the negotiation process Glaxo and Medi-Cal cannot come to an agreement, we will be disappointed, but we will recognize that's how business and government decisions sometimes work out and accept it," he said. "But we believe those negotiations should take place on a level playing field that doesn't disadvantage any party, and under conditions in which all parties know the rules."
 Glaxo Inc., the U.S. subsidiary of London-based Glaxo Holdings p.l.c. (NYSE: GLX), discovers, develops and markets prescription medicines for the treatment of gastrointestinal, central nervous system, respiratory, infectious, dermatological and cardiovascular diseases. It is headquartered in Research Triangle Park, N.C.
 -0- 5/4/93
 /CONTACT: Rick Sluder, Corporate Communications, Glaxo Inc., 919-248-2839/
 (GLX)


CO: Glaxo Inc. ST: North Carolina; California IN: MTC SU:

MM -- CH003 -- 4194 05/04/93 09:24 EDT
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Date:May 4, 1993
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