PHOENIX (Legal Newsline) - Allegations of fraudulently inflated prices for certain drugs have led to a settlement between Bristol-Meyers Squibb and Arizona's attorney general.

Bristol-Meyers Squibb has agreed to pay $900,000 to settle allegations that certain drugs purchased by consumers, insurers and other payers were inflated.

The settlement follows a 2005 lawsuit filed by Attorney General Terry Goddard in 2005 against 42 pharmaceutical companies. Goddard's suit alleged that deceptive trade practices that included the manipulation of the Average Wholesale Price of prescription drugs caused buyers to overpay.

Reimbursement rates for drugs are based upon drug manufacturer-supplied pricing data. The lawsuit against Bristol-Meyers Squibb alleges that the supplied pricing data manipulated prices, causing an inflation of costs to consumers taking chemotherapy and other serious illness drugs.

"These drug companies have broken the law and been grossly unfair to consumers," Goddard said. "Many of the people ripped off by these artificially high prices are seniors citizens living on fixed incomes and having to choose between expensive medicine or food and housing."

The lawsuit also alleged that financial incentives were provided by drug manufacturers to physicians and suppliers as a means of stimulating drug sales. The incentives included volume discounts, rebates, off-invoice pricing and free goods, which all came at the expense of Medicaid and Medicare programs.

The settlement with Bristol-Meyers Squibb is the third to be reached since the filing of the lawsuit for a total of $1.97 million. Eleven drug companies reached a $930,000 settlement in June which followed a previous GlaxoSmithKline settlement for $140,000. All of the settlement money is put into the attorney generals office's Consumer Fraud Revolving Fund in support of consumer fraud investigations, consumer education and litigation.