Price Fraud

All fifty States and the District of Columbia cover outpatient prescription drugs under Medicaid, which gives the government a very strong interest in receiving the lowest available drug pricing. In an effort to guarantee government the lowest available prices, Medicaid operates a Drug Rebate Program. In simplified terms, the Drug Rebate Program requires drug companies to agree to price ceilings on drugs for Medicaid patients in exchange for Medicaid coverage for most of their drugs. But the system is susceptible to fraud.

The price ceilings are supposed to be enforced by requiring the drug companies to pay quarterly rebates to State Medicaid agencies, based on:  the average price (“AMP”) at which a drug company sells the drug to wholesalers and the lowest price per unit (“best price”) it offers to any purchaser. And therein lies the catch: the success of these price controls hinges in substantial part on accurate price reporting by the drug companies about the prices they charge all other purchasers.  Too often, the information provided is not accurate. There is enormous potential for fraud in price reporting. The False Claims Act becomes relevant when drug companies knowingly submit false pricing information.

Case Examples

Some of the very largest whistleblower cases have focused on claims of fraudulent price reporting. By way of example:

In 2012, GlaxoSmithKline agreed to pay $160,972,069 to the federal government and $118,792,931 to the states to settle claims that it reported false drug prices, and underpaid rebates owed under the Medicaid Drug Rebate Program. Read more 

In 2008, Merck & Co. agreed to pay $400 million to settle whistleblower claims, under both federal and state law, alleging that the company defrauded Medicaid by submitting false drug pricing information, failing to pay required rebates on drug purchases reimbursed by Medicaid, and illegally offering hospitals deep discounts (“kickbacks”) to use its drugs Zocor and Vioxx in place of competitors’ brands. The whistleblower in this case was a former Merck district sales manager. He received $68 million as his share of the settlement. Read more

In 2004, Schering Plough agreed to pay more than $290 million to settle claims that the company had violated the False Claims Act and defrauded Medicaid by underpaying Medicaid Drug Rebates on Claritin, its antihistamine drug. Read more

In 2003, Bayer Corporation agreed to pay $251 million to settle whistleblower claims that the company violated the False Claims Act and defrauded Medicaid by relabeling products, selling them to a health maintenance organization at lower prices than the company was charging Medicaid, and then concealing the discounts to avoid paying rebates. The whistleblower in this case was a former Bayer executive. He received approximately $34 million.

If you have knowledge and solid evidence of fraud or false claims by a drug manufacturer, please contact our whistleblower attorneys.
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