MARYLAND RECEIVES $2 MILLION FROM SETTLEMENTS WITH GLAXOSMITHKLINE AND BAYER

Attorney General J. Joseph Curran, Jr. announced today that the State of Maryland has received $425,432.27 from GlaxoSmithKline Corporation ("GSK") and $1,586,763.51 from Bayer Corporation as its share of the settlement of two nationwide actions against the two pharmaceutical companies relating to violations of the federal Medicaid drug rebate program.

"These settlements are the result of a commitment by law enforcement to ensure the integrity of the Medicaid program and we are pleased to receive this money for the State," Curran said.

The settlement against GSK resulted from an investigation undertaken by the U.S. Attorney's Office for the District of Massachusetts. The Bayer settlement resulted from an investigation of a complaint filed in the U.S. District Court against Bayer in Massachusetts in 2000 that was also investigated by the U.S. Attorney's Office for the District of Massachusetts, as well as a criminal action filed against Bayer in 2000 in the same court. On behalf of 49 states and the District of Columbia, the National Association of Medicaid Fraud Control Units assisted the Massachusetts U.S. Attorney's Office in negotiating these settlements through a team led by the Directors of the Medicaid Fraud Control Units in Maryland, Pennsylvania and Washington State.

Both GSK and Bayer were alleged to have undertaken a scheme that would allow them to inflate their reported lowest sale prices of certain drugs to commercial users. These sale prices, called "best prices" under the applicable federal law, are used to calculate quarterly rebates to state Medicaid programs from pharmaceutical companies like GSK and Bayer that have drugs covered by state Medicaid plans and that have rebate agreements with the federal agency that oversees Medicaid. Medicaid is a joint federal and state program that provides healthcare benefits to eligible low-income Maryland residents.

Both GSK and Bayer were alleged to have sold drugs to the health maintenance organization Kaiser Permanente Medical Program at deeply discounted prices and then to have taken actions to conceal these transactions. The GSK drugs were Flonase, a prescription nasal spray, and Paxil, an anti-depressant. Bayer was also alleged to have engaged in the same scheme with another health maintenance organization, Pacificare/Health Systems. The Bayer drugs were Cipro, an antibiotic, and Adalat CC, an anti-hypertensive. Bayer also pleaded guilty to one federal criminal charge in connection with its activities.

While denying the allegations, GSK has agreed to pay a total of $87,600,922 in damages and penalties to the federal government and the states to resolve the claims against it. The total state share is $38,269,148.

While Bayer also denies the allegations on which civil liability is based, in order to settle these claims it has agreed to pay a total of $242,126, 580 in damages and penalties. The total state share is $108,956,961.

Bayer and GSK have also both entered into corporate integrity agreements with the Office of Inspector General of the U.S. Department of Health and Human Services.

GlaxoSmithKline was formed in 2001 as a result of the merger of Glaxo Wellcome, Inc. and SmithKline Beecham Corporation and has principal operations in both Research Triangle Park, N.C., and Philadelphia, Pa. Bayer Corporation is an Indiana corporation with its principal place of business in Pittsburgh, Pa.

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