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Bayer in probe talks
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May 10, 2000: 11:16 a.m. ET
Drug company in settlement talks with officials over drug pricing probe
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NEW YORK (CNNfn) - A unit of German drug company Bayer AG is in settlement talks with federal and state officials who are investigating deceptive pricing practices, the company said Wednesday.
Bayer Pharmaceuticals, based in West Haven, Conn., said it is talking to the Justice Department, the Department of Health and Human Services and several state prosecutors.
For three years, the officials have been investigating claims that drug companies have inaccurately reported their prices, possibly costing the Medicare and Medicaid programs more than $1 billion a year. The House Commerce Committee is also investigating.
 Medicare and Medicaid reimburse doctors and other medical providers for drugs they dispense based on the average wholesale price for the drugs, which is set by the industry. Investigators claim that pharmaceutical companies have set highly inflated average wholesale prices, resulting in windfalls to both the drug companies and the medical providers.
Among the 20 companies being investigated are Abbott Laboratories (ABT: Research, Estimates), Bristol-Myers Squibb Co (BMY: Research, Estimates), Glaxo Wellcome PLC (GLX: Research, Estimates) and SmithKline Beecham PLC (SBH: Research, Estimates), according to officials.
Daniel McIntyre, Bayer's vice president for public policy said, "We agree that the Medicaid reimbursement system is outdated and are doing our part to develop a more equitable system."
A spokesman for Glaxo Wellcome said its pricing practices "are fully within the law," according to an article Wednesday in the Wall Street Journal.
Officials estimate that settlements could cost the drug companies hundreds of millions of dollars, the report said.
Evidence of unfair pricing could also hurt the companies politically at a time when policy makers are considering letting Medicare directly reimburse patients for some drug expenses. The industry worries that such a move would lead to government regulation of prices.
Drug companies' stocks also suffered after a consumer advocacy group reported on April 26 that the prices of many prescription drugs used by older Americans rose faster than the rate of inflation. 
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Bayer AG
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