AG Van Hollen: Announces settlement against pharmaceutical manufacturers alleging average wholesale price manipulation

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Bill Cosh


MADISON — Attorney General J.B. Van Hollen announced today that the state has reached a $4.2 million settlement agreement with three of the defendants in the litigation charging thirty-six (36) pharmaceutical manufacturers with defrauding the Wisconsin Medicaid Program. The Department of Justice law enforcement action pending in Dane County alleges that the companies reported fictitious prices to deceive the Medicaid pharmaceutical reimbursement system to increase sales and market share.

Under the terms of the agreement announced today, Merck & Company, Inc, Schering Corporation, and Warrick Pharmaceuticals Corporation will pay a total of $4,250,000.00 to settle the state’s claims. The payment comprises $3.7 million in restitution to the Medicaid Program and $550,000 in costs and fees for prosecution of the action.

Van Hollen explained that Wisconsin law makes it unlawful for any person to make representations that are untrue, misleading, or deceptive with intent to sell pharmaceuticals. Federal regulations place limits on the amount Wisconsin Medicaid can pay for reimbursement of prescription drugs. To comply with those limits, Wisconsin must estimate the acquisition cost that providers are paying to obtain the drugs they later dispense to Medicaid recipients, and for which they obtain reimbursement from Wisconsin Medicaid. In order to determine this estimated acquisition cost, Wisconsin relies on published average wholesale prices (“AWPs”) published by a pricing compendium (First DataBank).

In the suit, Wisconsin alleged that the pharmaceutical manufacturers caused false “AWPs” to be published by First DataBank, knowing that Wisconsin would rely on that information to set its reimbursement formulas. Those fictitious and inflated “AWPs” reported by the manufacturers resulted in Wisconsin Medicaid reimbursing more for drugs than it would have if the accurate “AWPs” had been reported. Consequently, Wisconsin Medicaid paid substantially more than the actual cost of the drug.

The original complaint was filed in Dane County Circuit Court in 2004.

In February 2009, after a two week trial, a jury verdict against another manufacturer, Pharmacia, awarded $9 million in damages. The court also assessed forfeitures, costs, and fees and ordered the company to pay a total of over $22 million. Pharmacia has appealed the order, and the litigation against other manufacturers in Dane County has been stayed pending the results of that appeal.

Additionally, Dey, Inc., another of the defendants, settled the claims against it with an agreement and payment of $2 million. In September 2010, Baxter Healthcare Corporation, another of the defendants, settled the claims against it with an agreement and payment of $1.05 million to Wisconsin Medicaid. Two other defendants, Amgen, Inc., and Immunex, settled with the state in December 2008, including payment of a total of $2 million to Wisconsin Medicaid. In April 2010, four related defendants – Boehringer Ingelheim Pharmaceuticals, Inc., Boehringer Ingelheim Roxane, Inc., Ben Venue Laboratories, Inc., and Roxane Laboratories, Inc. – paid a total of $7.75 million to settle the state’s claims.

The settlement with Merck & Company, Incorporated, Schering Corporation and Warrick Pharmaceuticals Corporation, is another step toward successful conclusion of the complex litigation. A copy of the agreement is available at