AstraZeneca and Cephalon pony up $50M+ to settle Medicaid pricing claims

Benjamin Mizer

AstraZeneca ($AZN) and Teva Pharmaceutical's ($TEVA) Cephalon unit are together forking over more than $50 million to settle claims that they underpaid rebates owed to Medicaid programs. It's the latest chapter in the Department of Justice's crackdown on pharma's Medicaid and Medicare price reporting.

AstraZeneca will shell out $46.5 million plus interest to the U.S. government and states, while Cephalon will pay $7.5 million plus interest to resolve allegations of underpaying rebates, the DOJ said in a statement. The legal drama dates back to 2008, when Ronald Streck, a pharmacist and attorney, filed a whistleblower suit alleging the drugmakers intentionally lowered rebates they owed to Medicaid by developing a scheme to reduce prices.

Under the Medicaid Drug Rebate program, drugmakers are required to pay quarterly rebates based partly on the Average Manufacturer Prices (AMPs) they report to the government. AstraZeneca and Cephalon intentionally lowered AMPs for their drugs by paying service fees to wholesalers, the feds say. As a result, the U.S. was overcharged for its share of state Medicaid spending, the DOJ said in a statement.

The Medicaid rebate program "relies on drug manufacturers reporting accurate pricing information used in the rebate calculations," Principal Deputy Assistant Attorney General Benjamin Mizer, head of the DOJ's Civil Division, said in a statement. "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."

AstraZeneca drugs named in the lawsuit include cholesterol-fighter Crestor and antipsychotic Seroquel, and Cephalon meds named include Provigil and pain drug Actiq. A Teva spokeswoman declined to comment to the WSJ about the Cephalon settlement. But AstraZeneca is standing by its practices, with a spokesman telling the newspaper that the company "makes no concessions or admissions to fault in the settlement agreement and its price reporting decisions were undertaken in good faith."

AstraZeneca and Cephalon are not the only drugmakers settling up with the government over Medicaid and Medicare fraud allegations. In 2012, 5 companies including GlaxoSmithKline ($GSK) shelled out a combined $25 million over similar claims. The following year, Amgen ($AMGN) agreed to pay almost $11 million to resolve allegations that it reported false prices on several of its drugs. Swiss drugmaker Novartis ($NVS) was also the target of price-reporting claims, ponying up $12.64 million to the federal government earlier this year for allegedly inaccurate or outdated drug-reporting.

- here's the DOJ statement
- read AstraZeneca's settlement (PDF)
- here's Cephalon's settlement (PDF)
- get the Reuters story

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