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Four Drug Firms To Pay Back Millions In Medicaid Overcharges

First to pay a total of $124 million to states, feds

October 20, 2009
Four pharmaceutical firms have agreed to settlements with a number of states and the federal government and will pay $124 million to resolve claims that they violated the False Claims Act by failing to pay appropriate rebates for drugs that were paid for by Medicaid.

Mylan Pharmaceuticals, Inc. (MPI), UDL Laboratories, Inc. (UDL), AstraZeneca Pharmaceuticals LP, and Ortho McNeil Pharmaceutical, Inc., are participants in the Medicaid Rebate Program and executed Rebate Agreements with the United States. The companies agreed to pay quarterly rebates to Medicaid that were based upon the amount of money that Medicaid paid for each company's drugs.

"Companies that do not properly honor their repayment obligations to our Medicaid programs are violating the law and end up increasing the burden on taxpayers," said New York Attorney General Andrew Cuomo. "I applaud our multi-state partners and the federal government with whom we worked together to make sure the Medicaid program is accurately reimbursed."

The precise amount of a rebate is determined in part by whether a drug is considered an "innovator" drug or a "non-innovator" drug. The rebate for innovator drugs is higher than the rebate for non-innovator drugs. The participating states and the federal government found that the four companies sold innovator drugs that were manufactured by other companies and had classified those drugs as non-innovator drugs for Medicaid rebate purposes. As a result, the companies underpaid their rebate obligations to the Medicaid Program.

MPI and UDL must pay a combined $118 million to resolve allegations that they underpaid their rebate obligations with respect to several drugs. AstraZeneca must pay $2.6 million to resolve allegations that it underpaid its rebate obligations with respect to Albuterol and Ortho McNeil must $3.4 million regarding rebate allegations for Dermatop. From the total, $7,279,135 will be paid to entities that participated in the Public Health Service’s Drug Pricing Program.

A National Association of Medicaid Fraud Control Units team participated, on behalf of the settling states, in the negotiations with all four pharmaceutical companies that led to the settlement announced today. Team members included representatives from the Offices of the Attorneys General for the states of New York, New Hampshire and Ohio.

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