Drug Makers Settle Medicaid Overcharges
BOSTON (AP) — Pharmaceutical companies Bayer AG (BAY) and GlaxoSmithKline have each agreed to pay among the largest Medicaid abuse settlements in history to resolve allegations they overcharged the government insurance program for the poor.
Bayer will pay the government about $250 million and Glaxo will pay about $90 million for failing to give the Medicaid program the lowest price charged to any consumer, according to the agreement negotiated with the U.S. Attorney’s office in Boston and Medicaid fraud investigators around the country, The Boston Globe reported Wednesday.
In a statement to the Globe, Bayer confirmed the settlement and said it had fully cooperated with the government.
“We are now pleased to put this matter behind us,” the company said. The company did not have immediate comment Wednesday to The Associated Press.
The Globe reported that Bayer is pleading guilty to violating the Federal Prescription Drug Marketing Act and paying a criminal fine of about $5 million for alleged overcharges involving its antibiotic Cipro and its high blood pressure drug Adalat, citing unnamed federal investigators and others familiar with the case.
Glaxo, which was not accused of criminal wrongdoing, is paying a civil fine for overcharges involving its anti-depressant Paxil and nasal allergy spray Flonase, the Globe reported.
In a statement released Wednesday, Glaxo said it had agreed to an $87.6 million settlement. The Philadelphia-based company said the sole issue in the case was how it interpreted “an ambiguous aspect of the Medicaid Best Price Statute” and how that statute was applied in limited arrangements with a single customer who repacked a small number of products.
“GSK continues to believe that its interpretation of the law was reasonable and in good faith,” the statement read. “The company has agreed to a civil settlement to avoid the delay and expense of a trial.”
Prosecutors are expected to officially announce the settlement Wednesday in Boston. A spokeswoman for the U.S. attorney’s office did not immediate return a telephone call seeking comment Wednesday.
In December, Germany-based Bayer AG announced it had put aside $257 million to settle allegations it failed to pay rebates owed to Medicaid from 1995 to 2000.
The federal investigation focused on allegations that the companies hid their lowest prices from Medicaid by repackaging or relabeling their drugs under a middleman’s name. The middleman then sold the drug at a deep discount not reported to the government. By law, the companies are required to report all their prices and then pay Medicaid a rebate if they charge anyone less than the government.
All 50 states will share the settlement money. A whistleblower who alerted federal officials will also receive a share.
“It’s a very significant fine, and I do think (it) sends a message that hopefully will be heard by other companies that these kinds of practices are unacceptable,” Dr. Peter Lurie, deputy director of the Public Citizen’s Health Research Group in Washington D.C., told the Globe.
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