In today’s case, we examine a recent False Claims Act settlement involving the Medicaid drug rebate program. The drug rebate program[1. http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Benefits/Prescription-Drugs/Medicaid-Drug-Rebate-Program.html] is essentially a partnership between the Center for Medicare and Medicaid Services (CMS), state Medicaid offices, and private drug manufacturers. Generally, private drug manufacturers are offered the opportunity to “enroll” their prescriptions in the Medicaid program (thereby greatly increasing the breadth of potential sales) in exchange for their agreement to offer a rebate on these covered drugs, payable to state Medicaid offices on a quarterly basis. In essence, the drug companies benefit from enrollment in the Medicaid program, while states mutually benefit from the reduced costs for taxpayers. Moreover, the federal government is also entitled to a portion of these drug rebates congruent to its proportion of reimbursement coverage.
If a drug company fails to offer the appropriate rebate amount, or shortchanges the federal and state governments, it could find itself exposed to liability under the False Claims Act.
Details of the case against AstraZeneca & Celaphon
Quarterly rebate amounts are calculated using the Average Manufacturer Price (AMP), as self-reported by each drug company for each enrolled drug. Naturally, the higher the AMP for a certain drug, the higher the rebate amount the drug company will owe to the government for that drug. Allegedly, both AstraZeneca and Celaphon were underreporting the AMP for several of their top-selling prescription medications, thereby fraudulently reducing the amount of the rebate payable to state and federal Medicaid regulators. More specifically, the companies are alleged to have devised a scheme wherein they sold drugs to wholesalers at a certain price, and tacked on an additional “service fee” for the wholesaler to pay – which was nothing more than a fraudulent attempt to mask the true price paid by the wholesaler for the drugs. Relying on the sale price less the “service fee,” the drug companies were able to report fraudulently deflated AMPs, thus resulting in a decreased rebate.
The case was commenced in 2008 by a pharmacist and whistleblower. The amount of his reward – which could reach up to 30 percent of the ultimate settlement amount – has not been publicly revealed.
In addition to the federal government, the settlement includes California, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Louisiana, Massachusetts, Michigan, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Rhode Island, Tennessee, Texas, Virginia, Wisconsin, and the District of Columbia.
The settlement[2. http://freepdfhosting.com/0ef7263544.pdf] covers conduct occurring from October 2007 through June 2014. Pursuant to the agreements, Astra Zeneca will pay approximately $46 million in settlement funds, and Celaphon will pay the remaining $8 million.
Contact a healthcare fraud attorney today
If you are aware of potential fraud occurring within the healthcare industry – perhaps at the hands of your employer – please do not hesitate to contact Berger Montague today.