After cracking down on Medicaid fraud for over a decade, The Texas Attorney General’s Office recently reached two historic milestones. Since 2002, the Civil Medicaid Fraud Division’s recoveries in the State of Texas passed the $400 million mark, while total recoveries for the state and federal governments presently exceed $1 billion. Because the Medicaid program is co-funded by both the State and the federal government, fraudulent over-payments recovered by the Attorney General’s Office are shared with the Federal Treasury Department.
Most of the $1.01 billion recovered since 2002 is due to whistleblower lawsuits initially filed under seal by private parties. After, the Civil Medicaid Fraud Division (CMF) reviewed the claims, the State of Texas intervened in these cases in an effort to recover fraudulent over-payments to Medicaid providers. Under the Texas Medicaid Fraud Prevention Act, the whistleblower who initiated each case is entitled to a percentage of the money recovered.
Recognized around the nation for success with recovering wrongfully taken funds from the Medicaid program, Texas’s Medicaid Fraud Division is responsible for pursuing fraud claims through civil enforcement actions. A separate division of the Attorney General’s Office, the Medicaid Fraud Control Unit, handles criminal investigations on the basis of referrals from state agencies.
Texas as a Medicaid Fraud Leader
As a groundbreaking leader,Texas was the very first state in the nation to pursue a pharmaceutical manufacturer for improperly reporting the price of its drugs to the Medicaid program. Due to the fact that the Medicaid program uses manufacturer-reported pricing information as a way to determine the reimbursement rate for drugs, if manufacturers inflate the cost of products in State reports, pharmacies receive millions of dollars in fraudulent over-payments Drug pricing cases pursued by Texas’s Medicaid Fraud Division since 2002 are responsible for recoveries totaling more than $550 million, including over $200 million for the State of Texas.
Another significant responsibility of Texas’s Medicaid Fraud Division is illegal drug marketing cases. These cases typically involve pharmaceutical manufacturing companies who pay kickbacks as a means to encourage the purchase of their products for uses not approved by the U.S. Food and Drug Administration (FDA).
In 2012, pharmaceutical giant Johnson & Johnson and its Janssen unit agreed to pay $158 million to settle Texas officials’ claims that the drug maker fraudulently marketed Risperdal, an anti-psychotic drug, ending a trial over the allegations.
The J&J/ Janssen settlement resolved claims that it defrauded the Texas Medicaid program when they promoted Risperdal for multiple uses unapproved by U.S. regulations. One use included the marketing of Risperdal to children with psychiatric disorders. The state also claimed that J & J downplayed the health risks of Risperdal. The $158 million settlement was about one-quarter of the $579 million the state was originally seeking.
Under the terms of the settlement, J & J and its Janssen unit will pay $158 million for full resolution of all claims in the State of Texas. Texas joined the lawsuit filed in 2004 by whistle-blower, Allen Jones. Jones previously held a position as an investigator for the Pennsylvania Office of Inspector General and claimed he was fired after inquiring about company payments to a top pharmacist in Pennsylvania’s government who hid the money.
The Texas settlement marks the first time J & J agreed to resolve any state’s claims against Risperdal and is currently the largest Texas Medicaid fraud case brought by the state.