updated 8/4/2004 11:32:12 AM ET 2004-08-04T15:32:12

New York authorities sued one of the nation’s largest pharmacy benefit managers on Wednesday accusing Express Scripts Inc. of pocketing as much as $100 million in drug rebates that should have gone to the state.

“They were simply committing fraud,” said New York Attorney General Eliot Spitzer. “It’s an ugly word.”

Spitzer and state Civil Service Commissioner Daniel Wall accused the firm of violating its $600,000 contract to negotiate the lowest prices for drugs under health plans for state workers. The contract required the company to negotiate the lowest prices and return any rebates to the state.

Instead, ESI called the rebates an administrative fee or similar term and kept it, Spitzer contended. The state is seeking tens of millions of dollars, as much as $100 million in reimbursements, plus any penalties and fines, Spitzer said.

“They were disguising rebates ... in order to put those rebates in their pockets,” Spitzer said Wednesday.

The company denied the accusations Wednesday.

“Express Scripts has saved the state of New York more than $2 billion in drug costs since 1998,” the firm said a prepared statement. “During the contract, the state got all rebates for which it contracted, and more rebates than guaranteed, initially deep retail discounts got better, and use of low cost generic drugs increased.

“Express Scripts never recommends switches to a higher cost drug in connection with any client’s plan and does not accept pharmaceutical manufacturer funding for such programs. Express Scripts never conducted brand drug therapeutic interchange programs for the State of New York. Express Scripts also complied fully with its contract regarding the handling of data related to the New York plan.”

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