AstraZeneca and Cephalon Agree to Settlements in Medicaid Rebate Suit

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AstraZeneca & Cephalon Agree to Settlements

AstraZeneca & Cephalon Agree to Settlements

In separate settlements, drug makers AstraZeneca and Cephalon have agreed to pay more than $50 million to settle claims with the federal government, a number of states, and the District of Columbia that they underpaid rebates owed under the Medicaid Drug Rebate Program.

Under its settlement, AstraZeneca will pay $26.7 million to the federal government, with an additional $19.8 million split among 24 states and the District of Columbia, the Delaware News Journal (delawareonline) reports. Cephalon Inc. will pay $7.5 million in a separate settlement related to the same lawsuit.

In a statement from the Justice Department, Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, said, “The Medicaid Drug Rebate Program relies on drug manufacturers reporting accurate pricing information used in the rebate calculations.” Mizer said the settlements “demonstrate the Department of Justice’s commitment to ensuring that state Medicaid programs receive the full amount of rebates from manufacturers that Congress intended.”

Under the Medicaid Drug Rebate Program, drug makers make quarterly payments to state Medicaid programs in exchange for the programs’ coverage of their drugs. Rebate amounts are based, in part, on the average manufacturer prices (AMP) reported to the government: the higher the AMP, the greater the rebate. Federal prosecutors said AstraZeneca, Cephalon, Biogen Inc., and Genzyme Corp. all underreported the AMP for a number of their drugs. Prosecutors say they did this by improperly treating fees paid to wholesalers as price reductions. The underreporting resulted in the government being overcharged for its payments to state Medicaid programs, according to the News Journal.

The lawsuit that led to these settlements was filed in 2008 by Ronald J. Streck, a Virginia pharmacist and attorney, who had served as chief executive officer of the Healthcare Distribution Management Association. The suit originally accused 30 pharmaceutical companies of fraudulently manipulating drug prices in a scheme to lower the rebates they pay to the Medicaid Drug Rebate Program, but the number of defendants was eventually reduced to four, the News Journal reports. Biogen previously settled, and with the AstraZeneca and Cephalon settlements, Genzyme, a subsidiary of Sanofi S.A., is the only remaining defendant.

AstraZeneca said in a statement that the settlement was not an admission of fault. The company asserted its price reporting decisions were made in good faith, according to the News Journal. “We continue to believe that those decisions reflect reasonable interpretation of the applicable laws and regulations,” the statement said. The company has until Monday to pay the portion of the settlement owed to the federal government. Payment terms for the individual states and the District of Columbia are spelled out in separate settlement agreements with those entities.

The lawsuit was filed under the whistleblower provisions of the federal False Claims Act, a law that dates back to the Civil War era, enacted to combat rampant fraud by contractors. The law permits private individuals to sue on behalf of the government for false claims, and if the lawsuit is successful, the whistleblower receives a share of any monies recovered by the government, typically 15 to 25 percent. The amount Streck will receive has not yet been determined, the News Journal reports.