Employers and employees began paying higher Social Security taxes this year, and Medicare cost-sharing requirements also increased. As of January 1, the amount of an employee's wages subject to FICA taxes increased to $87,000 from $84,900. Employers and employees each pay 7.65% FICA taxes. The Medicare Part B premium, which covers physician services, also increased to $58.70 per month, an increase of $4.70 per month over 2002.
NEW YORK—In October, Pfizer Inc. entered into an agreement with the U.S. Department of Justice to resolve a previously disclosed civil investigation into grants made by Warner-Lambert Company before its acquisition by Pfizer to health plans and pharmacy benefit managers and their effect on the pricing of Lipitor.
Pfizer will pay $49 million to federal and state authorities to settle allegations that 2 grants made by Warner-Lambert's Parke-Davis division in 1999 to the Ochsner Health Plan of New Orleans should be characterized as rebates, which would entitle the government to a further discount for Lipitor under the Medicaid best price rule. Pfizer acquired Warner-Lambert in June 2000 after the transactions at issue. Pfizer also entered into a corporate integrity agreement with the Office of the Inspector General of the U.S. Department of Health and Human Services.
The allegations stem from a lawsuit by a former Warner-Lambert employee. The government said it will not pursue additional allegations made in that lawsuit involving payments to 5 other health plans and 2 pharmacy benefit managers.
For details, go to www.pfizer.com or call Mariann Caprino of Pfizer at (212) 733-4554.
Class status denied in HMO suits
The managed care industry won a major legal victory when a federal judge in Miami denied class-action status to several suits alleging fraud and racketeering on behalf of 145 million HMO plan members nationwide. In denying class certification, the federal judge said plaintiffs failed to establish a common scheme among the companies, noting that health plans are negotiated locally through subsidiaries and can vary from 1 contract to the next. Generally, courts permit class-action suits only when the claims that the plaintiffs allege are similar enough to be lumped together and resolved in 1 trial.
However, in a companion case, a U.S. district judge in Miami did grant class certification to a half-dozen suits challenging industry reimbursement practices on behalf of more than 600,000 physicians, and he put that case on a fast track to trial. The judge found enough similarity in the way HMOs code and process reimbursement payments to doctors to warrant class-action status. The suit alleges that HMOs systematically bundle and downgrade reimbursement claims to deny or delay payments.
Both rulings signal a turning point in the managed care industry's legal wars, which began in 1999 as some of the country's most powerful plaintiffs' attorneys turned their attention from the cigarette industry to HMOs.
The litigation, along with increased state regulation, prompted changes to make managed care more consumer-friendly. More medical tests and treatments are covered now than 3 years ago, and patients have more power to appeal treatment denials. In June, the U.S. Supreme Court affirmed states' authority to establish independent review boards for coverage disputes.
Pharmacia settles disagreements with Allergan, Alcon
Pharmacia Corporation said late last year that it had reached a global settlement in principle with Allergan Inc. to resolve an intellectual property dispute involving Allergan's ophthalmic product, Lumigan (bimatoprost ophthalmic solution, 0.03%). The agreement ended all outstanding patent disputes relating to Lumigan between the companies and gives Allergan the rights to continue selling the product throughout the world.
The U.S. legal action was initiated by Allergan in March 2001 before receiving Food and Drug Administration approval to market Lumigan in competition with Pharmacia's Xalatan. Xalatan (latanoprost ophthalmic solution), introduced in 1996, is the world's leading brand of medicine for treatment of open-angle glaucoma and ocular hypertension. Allergan will make a $120 million payment to Pharmacia and will pay undisclosed royalties for a specified time on future sales of Lumigan.
The Allergan settlement was the second legal action resolved by Pharmacia in relation to intellectual property in the ophthalmology field. Pharmacia reached a global settlement with Alcon Inc. on all intellectual property disputes involving Alcon's ophthalmic product, Travatan (travoprost ophthalmic solution, 0.004%). The agreement ends all outstanding patent and trademark disputes relating to Travatan between the companies worldwide and gives Alcon the unrestricted right to continue selling Travatan. In return, Alcon will pay Pharmacia royalties for a specified time based on Alcon's past and future sales.
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