November 6, 2015

State Fraud Enforcement Spotlight — Astrazeneca and Cephalon

By the C|C Whistleblower Lawyer Team

On Wednesday, New York State Attorney General Eric T. Schneiderman announced that AstraZeneca LP and Cephalon, Inc. agreed to pay $54 million to settle government charges they overcharged state Medicaid programs for their pharmaceutical products.  AstraZeneca will pay $46.5 million and Cephalon, the wholly-owned subsidiary of Teva Pharmaceutical Industries. Ltd., will pay $7.5 million.  The settlement is with virtually every state and the federal government.  See NY Press Release.

According to the government, the two pharmaceutical companies underpaid drug rebates owed the states under the Medicaid Drug Rebate Program which requires drug makers to periodically return to the government a portion of their Medicaid proceeds.  The program is designed to ensure states pay competitive prices for drugs and is based on the average price drug wholesalers pay for the manufacturers’ drugs.  The greater this Average Manufacturer’s Price (or AMP) is, the greater the rebate the manufacturer must pay the government.  The government charged that AstraZeneca and Cephalon falsely treated certain fees paid to wholesalers as discounts so they could improperly decrease the AMP AstraZeneca and Cephalon reported to the federal government which falsely decreased the rebates they paid to the states.

In announcing the settlement, Attorney General Schneiderman stressed how “New Yorkers rely on Medicaid for essential health care services, and when companies overcharge Medicaid, it harms taxpayers and patients alike.”  He further warned that his office “will continue working to root out Medicaid fraud and safeguard this critical program.”  The allegations first arose in a whistleblower lawsuit filed by Virginia pharmacist and attorney Ronald Streck under the quit tam provisions of the Federal False Claims Act, New York False Claims Act and other state false claims statutes.  Mr. Streck will receive a yet-to-be-disclosed whistleblower award from a portion of the government’s recoveries.

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