State Attorney General Terry Goddard filed a suit Wednesday against 42 drug companies he claims have cheated Arizona consumers and Medicare out of tens of millions of dollars through inflated drug prices.

Arizona, along with at least 14 other states including Connecticut, New York, Massachusetts, Nevada and California, is pursuing similar actions against domestic and foreign drug companies. The goal of the suits is to recover damages and force drug companies to change their pricing practices.

Goddard said the drug companies have inflated or misstated the average wholesale price of their prescription drugs, listing prices much higher than what they actually charge some doctors or pharmacies.

When insurers, including the Arizona Health Care Cost Containment System (the state's Medicaid program) and Medicare, reimburse doctors and pharmacies for those drugs, they use the average wholesale price, in effect paying hugely inflated prices, sometimes as much as 7,500 percent more than the doctors and pharmacies paid, according to the suit.

The huge profits for doctors and pharmacies, in turn, encourage more business for the drug companies, Goddard said.

"It's a fraud," he said. "Insurance companies and consumers are being ripped off."

Goddard was careful to note that only physicians who administer drugs in their offices could be involved in the inflated pricing scheme. Most commonly, those are drugs used in chemotherapy or transplant treatment. According to the suit, this does not involve hospitals, which purchase drugs under different pricing guidelines.

Andrea Smiley, spokeswoman for the Arizona Medical Association, said that "the overwhelming majority of Arizona physicians do not dispense drugs from their office; the exceptions would include oncologists, dermatologists and sometimes pediatricians."

The profits coming from the jacked-up pricing can be astronomical.

For instance, Goddard says, Abbott Laboratories Inc. lists a price of $382.14 for a 1-gram vial of the antibiotic vancomycin, which is used for severe infections. But the providers, the doctors and pharmacies, are charged only $4.98 for the drug, leaving a profit of $377.16, or 7,547 percent. Some drug firms sell the salt solution sodium chloride to pharmacies and physicians for about $4, with the average wholesale price listed at about $670.

The complaint also says that drug manufacturers provide financial incentives to physicians and suppliers to stimulate drug sales, such as volume discounts, rebates and free goods, at the expense of Medicaid and Medicare. The incentives were not offered to government or consumers.

Baxter Healthcare Corp. is one of the companies named in the suit.

"We have not seen this suit, so can't really comment," spokeswoman Deborah Spak said. "We have always operated in a lawful and ethical manner."

Goddard said he doesn't think that many of the drug companies have been behaving ethically at all and said, "We want damages."

He said the attorneys general in many states with whom he has consulted agree that pharmaceutical firms must "stop inflating drug prices."

"We want to drive home a lesson," Goddard said. "There is no transparency in the drug-pricing situation, and there needs to be. And this sort of practice has to stop."

Goddard cited research that says Americans pay 174 percent higher drug prices on average than the rest of the world.