ASTRAZENECA AND CEPHALON TO PAY MILLIONS FOR ALLEGED UNDERPAYMENT OF REBATES OWED MEDICAID DRUG REBATE PROGRAM

FROM:  U.S. JUSTICE DEPARTMENT 

Monday, July 6, 2015

AstraZeneca and Cephalon to Pay $46.5 Million and $7.5 Million, Respectively, for Allegedly Underpaying Rebates Owed Under Medicaid Drug Rebate Program

AstraZeneca LP has agreed to pay the United States and participating states a total of $46.5 million, plus interest, to resolve allegations that it knowingly underpaid rebates owed under the Medicaid Drug Rebate Program, the Justice Department announced today.  Of that amount, AstraZeneca will pay roughly $26.7 million, plus interest, to the United States, and the remainder to states participating in the settlement.

In a separate settlement arising out of the same case, Cephalon Inc. has agreed to pay the United States and participating states a total of $7.5 million, plus interest, to resolve similar allegations.  Of that amount, Cephalon will pay roughly $4.3 million, plus interest, to the United States, and the remainder to states participating in the settlement.

“The Medicaid Drug Rebate Program relies on drug manufacturers reporting accurate pricing information used in the rebate calculations,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, the head of the Justice Department’s Civil Division.  “These settlements demonstrate the Department of Justice’s commitment to ensuring that state Medicaid programs receive the full amount of rebates from manufacturers that Congress intended.”

“We will continue to police the pharmaceutical industry when the Medicaid program overpays for drugs,” said First Assistant U.S. Attorney Louis D. Lappen of the Eastern District of Pennsylvania.  “As these settlements demonstrate, it is critical for pharmaceutical manufacturers to comply with requirements of programs such as the Medicaid Drug Rebate Program to ensure that the government and the taxpayers are treated fairly in the reimbursement process.”

Pursuant to the Medicaid Drug Rebate Program, drug manufacturers are required to pay quarterly rebates to state Medicaid programs in exchange for Medicaid’s coverage of the manufacturers’ drugs.  The quarterly rebates are based, in part, on the Average Manufacturer Prices (AMPs) that the manufacturers report to the government for each of their covered drugs.  Generally, the higher the reported AMP for a drug, the greater the rebate the manufacturer pays to state Medicaid programs for the drug.  These settlements resolve allegations that AstraZeneca and Cephalon underreported AMPs for a number of their drugs by improperly reducing the reported AMPs for service fees they paid to wholesalers.  As a result, the government contends that AstraZeneca and Cephalon underpaid quarterly rebates owed to the states and caused the United States to be overcharged for its payments to the states for the Medicaid program.

The two settlements partially resolve a lawsuit filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.  The amounts to be received by the whistleblower in this suit, Ronald J. Streck, a pharmacist, have not yet been determined.

These settlements illustrate the government’s emphasis on combating health care fraud and mark another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $24.8 billion through False Claims Act cases, with more than $15.9 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlements with AstraZeneca LP and Cephalon Inc. were the result of a coordinated effort among the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Eastern District of Pennsylvania and the Department of Health and Human Services-Office of Inspector General.

JUSTICE DEPARTMENT OFFICIAL COMMENTS ON $3 BILLION GSK SETTLEMENT

FROM:  U.S. DEPARTMENT OF JUSTICE
Acting Assistant Attorney General for the Civil Division Stuart F. Delery Speaks at the GSK Press Conference Washington, D.C. ~ Monday, July 2, 2012
Thank you, Bill, for that introduction.

As Deputy Attorney General Cole mentioned, today’s $3 billion resolution resolves several major investi gations of the company.  Specifically, t he global settlement resolves allegations relating to three major issues:

First, GSK will pay $1.8 billion to resolve criminal and civil liability related to off-label marketing.   This includes $757 million in criminal fines and forfeitures for misbranding the drugs Paxil and Wellbutrin, and $1.043 billion under the False Claims Act to resolve civil allegations regarding off-label promotion and the payment of kickbacks involving these and other drugs.

The second investigation resolved today relates to the diabetes drug Avandia.   GSK will pay a $243 million criminal fine for failing to report required safety data to FDA.   In the related civil settlement, GSK will pay $657 million to resolve allegations about representations it made concerning Avandia’s safety and efficacy.

The third investigation involves allegations of false best prices and the underpaying of rebates owed under the Medicaid Drug Rebate Program. GSK will pay $300 million to resolve civil liability under the False Claims Act related to these allegations.

In a moment, U.S. Attorney Carmen Ortiz will describe the conduct revealed by our investigations.   But today’s resolution is significant not just because GSK’s conduct was egregious or because it is the largest health care fraud settlement in the Department’s history.
 
Health care fraud is an epidemic that touches every aspect of our lives. And yet, for far too long, we have heard that the pharmaceutical industry views these settlements merely as the cost of doing business.   That is why this Administration is committed to using every available tool to defeat health care fraud.

As we did with Abbott Laboratories a few weeks ago, today’s resolution seeks not only to punish wrongdoing and recover taxpayer dollars, but to ensure GSK’s future compliance with the law.  The Corporate Integrity Agreement, which Department of Health and Human Services Inspector General Dan Levinson will describe in a moment, exemplifies best practices in compliance.  Both that agreement and the plea agreement require GSK to maintain certain compliance policies that the company has recently put into effect.

In addition, for the next five years, the plea agreement requires GSK to report to the Department of Justice any probable violations of the Federal Food, Drug, and Cosmetic Act concerning promotional activities and reporting obligations.   And GSK’s U.S. President and Board of Directors must personally certify the company’s compliance with the law every year.
And for every day that one of these reports or certifications is late, or one of these policies is not maintained, GSK agrees to pay the government $20,000 in stipulated damages.

The changes we are requiring of GSK and others may not end health care fraud, but they will go a long way to bringing about much-needed change in the way the pharmaceutical industry conducts business.   And because we know that many companies already play by the rules, these changes will help level the playing field, reduce the incentives to cut corners, and make clear that good compliance is also good business.

I want to echo the Deputy Attorney General’s comments about all of the many public servants in Boston, Colorado and across the country that contributed to this matter.   In particular, I want to recognize the dedicated attorneys, investigators and support staff of the Civil Division – here in Washington – who are the backbone of all of our health care fraud enforcement efforts.

Now, it’s my pleasure to introduce Carmen Ortiz, the U.S. Attorney for the District of Massachusetts.