Drug maker AstraZeneca has agreed to pay $46.5 million plus interest to settle claims that it underpaid rebates it owed under Medicaid.
The company will pay $26.7 million to the U.S. government, and $19.8 million will be split among 24 states and the District of Columbia, federal prosecutors say, the Delaware News Journal (delawareonline) reports. Cephalon Inc., a subsidiary of Teva Pharmaceuticals, will pay $7.5 million in a separate settlement related to the same case.
Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, said in a statement, “The Medicaid Drug Rebate Program relies on drug manufacturers reporting accurate pricing information used in the rebate calculations.” According to Mizer, “These settlements demonstrate the Department of Justice’s commitment to ensuring that state Medicaid programs receive the full amount of rebates from manufacturers that Congress intended.”
Under the rebate program, drug makers make quarterly rebate payments to state Medicaid programs in exchange for coverage of their drugs. Those rebates are based, in part, on the average manufacturer prices that pharmaceutical companies report to the government for each drug. The higher the AMP, the greater the rebate. Federal prosecutors said AstraZeneca, Cephalon, Biogen Inc., Genzyme Corporation all underreported the AMP for a number of their drugs by improperly treating fees paid to wholesalers as price reductions. As a result, the government was overcharged for its payments to the states for the Medicaid program, according to the News Journal.
The settlement resolves a whistleblower lawsuit filed in 2008 by Ronald J. Streck, a Virginia pharmacist and attorney, who had been chief executive officer of the Healthcare Distribution Management Association. He accused 30 pharmaceutical companies of fraudulently manipulating the prices they report to the federal government as part of a scheme to lower the rebates they pay to the Medicaid Drug Rebate Program. The number of defendants was eventually reduced to four, the News Journal reports.
AstraZeneca denied the allegations made by Streck and federal prosecutors and released a statement saying the settlement was not an admission of fault. The company said its price reporting decisions were made in good faith, according to the News Journal. AstraZeneca wrote, “We continue to believe that those decisions reflect reasonable interpretation of the applicable laws and regulations.” The company has until Monday to pay the portion of the settlement owed to the federal government. Payment terms for the states are spelled out in separate settlement agreements. Biogen previously settled its case leaving Genzyme, a subsidiary of Sanofi S.A., as the lone remaining defendant.
The lawsuit was filed under the whistleblower provisions of the federal False Claims Act, a law dating back to the Civil War era, which permits private individuals to sue on behalf of the government for false claims and share in any monies recovered by the government. Federal prosecutors say the amount Streck will receive in the settlement has not yet been determined, according to the News Journal.