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In the largest Medicaid
fraud settlement in U.S. history, two pharmaceutical companies agreed April
16 to pay a combined total of $344 million to settle allegations that it
illegally repackaged drugs and sold them at prices lower than the prices
paid by the federal government and state Medicaid programs. The settlement
is significant because it will, for the first time, have a direct benefit
for the providers and patients participating in the Public Health Service’s
340B drug discount program.
According to the federal
government, Bayer Corp. and GlaxoSmithKline engaged in a “lick and stick”
scheme, under which they sold privately labeled drugs to Kaiser Permanente
at deeply discounted prices and hid the arrangement from the government,
enabling the companies to avoid an obligation to pay millions of dollars in
additional rebates to Medicaid and discounts to the 340B program. The
Public Hospital Pharmacy Coalition and its counsel, Powers Pyles Sutter &
Verville, worked diligently to ensure that the providers in the Public
Health Service’s 340B drug discount program would also be included in the
settlement and we are pleased to report that our members will recoup losses
from overpayments. As stated in the government’s press release, “today’s
settlements are the first national resolutions to recoup losses to the PHS
program……It will ensure that PHS programs will be repaid in full the monies
they lost.”
The Bayer drugs covered in
the settlement include Cipro from the First Quarter 1996 to the First
Quarter 2001 and Adalat CC during the Fourth Quarter 97 through the First
Qt. 01. The GSK drugs include Flonase from the Third Quarter 1997 through
Third Qt. 2000 and Paxil during the First Qt. 2001. The government has
accepted the Coalition’s recommendation that the manufacturers should be
required to send refunds in the form of a check to the entities that were
overcharged as opposed to a credit or other means of repayment According
to the settlement, Bayer is required to pay the PHS entities that purchased
the drugs in question no less than $9,482,620. GSK is required to pay no
less than $2,558,371. Within 10 days of sending reimbursements to covered
entities, the companies are required to submit a report to the HHS Office of
Inspector General (IG) to determine whether the companies correctly
calculated the overcharges and fully reimbursed each PHS entity. If the IG
determines that the companies failed to include any PHS entity for which
reimbursement is owed or underpaid the reimbursement, the IG will request
that the companies pay the additional amount owed.
According to the US
Attorney General’s Office, the GSK settlement is final and the company has
60 days to issue checks to covered entities. The Bayer settlement won’t be
final until after a plea is taken and a sentence is imposed for the criminal
portion of the case. Attached is a link to the government press release as
well as a fairly detailed article that appeared in the New York Times. If
you have any questions, feel free to contact Bill von Oehsen or Ted Slafsky
at 202-466-6550.
http://www.usdoj.gov/usao/ma/presspage/April2003/BAyer-settlement.htm
http://www.nytimes.com/2003/04/17/business/17DRUG.html?th=&pagewanted=print&position=
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