This week’s Department of Justice “catch of the week” goes to AstraZeneca LP and Cephalon Inc. On Monday, each of these pharmaceutical companies agreed to settle charges they violated the False Claims Act by knowingly underpaying rebates they owed under the Medicaid Drug Rebate Program. AstraZeneca agreed to pay $46.5 million with roughly $26.7 million going to the United States and the balance going to various states. Cephalon agreed to pay the United States and participating states a total of $7.5 million. See DOJ Press Release.
Under the Medicaid Drug Rebate Program, drug makers must pay quarterly rebates to state Medicaid programs in exchange for Medicaid’s coverage of the manufacturers’ drugs. These rebates are tied to the Average Manufacturer Prices (AMP) the manufacturers report to the government for each of their covered drugs. Generally, the higher the reported AMP, the higher the rebate under the Medicaid program. According to the government, AstraZeneca and Cephalon intentionally underreported AMPs to reduce the quarterly rebates they owed the states under this program. They allegedly did this by improperly reducing the reported AMPs for service fees they paid to wholesalers. The government claims this caused the United States to be overcharged for its payments to the states for the Medicaid program.
In announcing the settlement, the government stressed the need for drug manufacturers to comply with all Medicaid program requirements. According to First Assistant US Attorney Louis D. Lappen of the Eastern District of Pennsylvania: “As these settlements demonstrate, it is critical for pharmaceutical manufacturers to comply with requirements of programs such as the Medicaid Drug Rebate Program to ensure that the government and the taxpayers are treated fairly in the reimbursement process.” He further cautioned, “[w]e will continue to police the pharmaceutical industry when the Medicaid program overpays for drugs.” The allegations first arose in a whistleblower lawsuit filed by pharmacist Ronald J. Streck under the qui tam provisions of the False Claims Act. He will receive a yet-to-be determined whistleblower award.
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