Two False Claims Act cases have settled, resulting in $54 million in payouts.
Quarterly Rebates to Medicaid
Pursuant to the Medicaid Drug Rebate Program, each quarter, drug manufacturers are required to pay rebates to state Medicaid programs. This is in exchange for Medicaid’s coverage of the manufacturers’ drugs.
These quarterly rebates are based partly on the Average Manufacturer Prices (AMPs) the manufacturers report to the government per each covered drug. It follows that the higher the AMP for a given drug, the higher the rebate state Medicaid programs get from the manufacturer.
Underreporting AMP’s
Both AstraZeneca and Cephalon allegedly underreported AMPs for several of their drugs. They did so by improperly reducing the reported AMPs for service fees they paid to wholesalers.
By underpaying quarterly rebates to state Medicaid programs, federal officials say it caused the United States to be overcharged for its payments to states for the Medicaid program.
Millions in Settlement Payouts
AstraZeneca will have to pay $46.5 million, plus interest. This settlement resolves the allegations it knowingly underpaid rebates owed through the Medicaid Drug Rebate Program.
$26.7 million of that, plus interest, will be going to the United States. The remaining $19.8 million will go to the states participating in the settlement.
Similarly, Cephalon will be paying $7.5 million, along with interest, to settle similar allegations. $4.3 million of the settlement will go to the United States and the remaining $3.2 million will be divided among the states participating in the settlement.
These two settlements partially resolve a lawsuit filed under the whistleblower, or qui tam, provisions of the False Claims Act. This act permits private individuals to sue on behalf of the government for false claims. It also allows them to share any recovery.