April 16, 2003
Sean Caine, 410-576-6357
ANNOUNCES OVER $300 MILLION NATIONAL
SETTLEMENT WITH DRUG MANUFACTURERS
Maryland to Receive Approximately $2 Million
General J. Joseph Curran, Jr. announced today that his Medicaid
Fraud Control Unit is among 48 Units nationally to reach settlements,
in principle, with GlaxoSmithKline GSK and Bayer Corporation for
violating the federal Medicaid drug rebate statute by failing to
report "best price" information and their resulting failure
to pay sufficient rebates to the state Medicaid programs in connection
with their private labeling of certain drugs for health maintenance
addition to the civil settlement, amounting to $87,600,922 in damages
and penalties to the federal government and the states, GSK will
enter into a Corporate Integrity Agreement with the U.S. Department
of Health and Human Services, Office of Inspector General. At the
insistence of the National Association of Medicaid Fraud Control
Units, GSK will be required to certify its "best price"
methodology. This will add a new responsibility for the manufacturer
and will enhance future state enforcement.
has agreed to pay $242,126,570 in damages and penalties to the federal
and state governments for knowingly misreporting its "best
price" to HCFA and underpaying its Medicaid rebates for Cipro
and Adalat CC that was private labeled for Kaiser and PacifiCare
from its determination of "best price." Bayer will plead
guilty to a charge of violating the Food, Drug and Cosmetics Act
in federal district court in Boston. The government will recommend
that Bayer pay a fine of $5,590,800. An addendum with new obligations
will be added to Bayers current Corporate Integrity Agreement
with the U.S. Department of Health and Human Services, Office of
Inspector General. At the insistence of the National Association
of Medicaid Fraud Control Units, the CIA will require Bayer to certify
its "best price" methodology. This new responsibility
will enhance future state enforcement.
National Association of Medicaid Fraud Control Units represents
the 48 federally certified Medicaid Fraud Control Units that investigate
and prosecute Medicaid provider fraud.
settlements, which include 49 states and the District of Columbia,
together with two major drug manufacturers represent the largest
national Medicaid fraud settlements ever.
Bayer and GlaxoSmithKline sold products to HMOs at deeply discounted
prices, and then concealed and avoided their obligation to pay additional
rebates to the Medicaid programs. This was accomplished by re-labeling
or re-packaging these drugs under the HMOs private label.
This fraud scheme is referred to as "lick and stick."
federal Medicaid drug rebate statute is designed to return money
to the Medicaid program in the form of rebates from drug manufacturers.
Under the statute, in order to have the pharmaceuticals eligible
for Medicaid payment, all pharmaceutical manufacturers must provide
"best price" information to the Centers for Medicare and
Medicaid Services (formerly HCFA). "Best price" is the
lowest price that a manufacturer offers its products for sale to
commercial purchasers. CMS uses this "best price" information
to calculate rebates payable to the state Medicaid programs under
U.S. Attorneys Office for the District of Massachusetts conducted
an investigation into alleged improprieties relating to the reported
"best price" for Flonase, a nasal spray, and Paxil, an
anti-depressant. Flonase was manufactured and sold by Glaxo Wellcome
and Paxil was manufactured and sold by SmithKline Beecham. These
two companies merged and became GlaxoSmithKline in December 2001.
a private labeling agreement with Kaiser Permanente, an HMO in California,
Glaxo Wellcome manufactured, packaged and shipped Flonase to Kaiser,
but substituted the Kaiser unique identifying number for the Glaxo
Wellcome unique identifying number on the label. The purpose of
the private labeling arrangement was to provide Kaiser additional
price discounts on Flonase without having to report the discounted
price as Glaxo Wellcomes "best price", thereby avoiding
the obligation to pay additional rebates to Medicaid under the Medicaid
rebate program. Similarly, SmithKline began private labeling Paxil
for Kaiser. Paxil was manufactured, packaged and shipped by SmithKline
to Kaiser, but SmithKline substituted Kaisers unique identifying
number for SmithKlines unique identifying number on the label.
SmithKline provided Kaiser additional price discounts on Paxil without
reporting the newly discounted price to the Medicaid rebate program,
thereby avoiding payment of additional rebates.
was filed in federal district court in Boston in February 2000 and
the U.S. Attorneys Office conducted an investigation into
alleged improprieties relating to the reported "best price"
for two of Bayers drugs, Cipro, an antibiotic and Adalat CC,
an anti-hypertensive. Bayer agreed to private label Cipro and Adalat
CC for Kaiser and to sell these drugs to Kaiser at a discounted
price. Bayer also agreed to private label Adalat CC for PacifiCare,
also an HMO, and sell the private labeled Adalat CC to PacifiCare
at a discounted price.
historic settlement represents a national commitment by law enforcement
to curb the effects of high prescription drug costs, by ensuring
that the integrity of the Medicaid program is preserved and protected,"
Attorney General Curran said.
is the federal/state health care insurance program that provides
health care coverage for the economically disadvantaged.
settlements and prosecution of the Bayer Corporation are the result
of investigations conducted by the U.S. Attorneys Office for
the District of Massachusetts. That office requested the assistance
of NAMFCU to negotiate on behalf of the state Medicaid programs.
The state negotiating team for both cases was lead by the Directors
of the Maryland, Pennsylvania and Washington State MFCUs.