Drug companies Wyeth and Pfizer Inc. have agreed to pay the United States $784.6 million to settle a whistleblower’s False Claims Act lawsuit alleging they “created elaborate pricing schemes to deceive Medicaid into paying more than it should” for proton pump inhibitor (PPI) drugs, federal prosecutors announced Wednesday.
According to the whistleblower complaint, Wyeth sold Protonix Oral and Protonix IV to hospitals through a bundling arrangement that provided deep discounts on the drugs if hospitals placed them on their formulary and made them available within the hospital.
These bundling arrangements induced hospitals to buy Protonix Oral, a form of the drug that hospitals had little use for because other oral proton pump inhibitor drugs, which are primarily used to treat acid reflux, were competitively prices and just as safe and effective.
According to the U.S. Department of Justice, Wyeth wanted to control the hospital market because patients discharged from the hospital on Protonix Oral were likely to stay on the drug for long periods of time, rather than switch to competing drugs, during which time payers, including Medicaid, would pay nearly full price for the drug.
The rules of the Medicaid program require drug companies to sell brand-name drugs to Medicaid at the best prices they offer to other large drug customers. Based on those discounted prices, drug companies provide rebates to the Medicaid program so that it receives the same discounts other large customers receive.
The whistleblower lawsuit alleged that Wyeth hid the bundled discounts from Medicaid, thus denying the program the same discounted prices its other customers paid. This scheme allowed Wyeth to avoid paying hundreds of millions of dollars in rebates to Medicaid from 2001 to 2006. Under the terms of the settlement, Wyeth will pay $413,248,820 to the federal government and $371,351,180 to state Medicaid programs.
Pfizer Inc. acquired Wyeth in 2009. The acquisition not only shifted Wyeth’s assets to Pfizer, but made Pfizer responsible for it liabilities as well.
“This settlement demonstrates our unwavering commitment to hold pharmaceutical companies responsible for pursuing pricing schemes that attempt to manipulate and overcharge federal health care programs – programs that protect the poor and disabled – for drugs sold to commercial customers at much lower prices,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.
Lauren Kieff, a former hospital sales representative for the pharmaceutical company AstraZeneca Pharmaceuticals, LP, and William St. John LaCorte, a physician practicing in New Orleans, La., filed the lawsuit against Wyeth and Pfizer under the whistleblower provisions of the False Claims Act. They will share a whistleblower award of more than $98 million for their role in exposing the rebate fraud and helping the government recover vital Medicaid funds.
Source: The U.S. Department of Justice