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Wyeth and Pfizer to pay $784.6 million for underpaying Medicaid

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HARRISBURG, Pa. — Pennsylvania Attorney General Kathleen G. Kane’s office today announced Pennsylvania has reached an agreement in principle to settle allegations against Wyeth, a wholly owned subsidiary of Pfizer, Inc.

The settlement will resolve allegations that Wyeth between 2001 and 2006 knowingly underpaid rebates owed under the Medicaid Drug Rebate Program for the sales of Protonix Oral and Protonix IV.

Under the settlement, Wyeth agreed to pay a total of $784.6 million to the federal government and individual states. More than $371 million of that amount will go to the Medicaid program. Pennsylvania will receive approximately $12.4 million under the settlement.

The settlement stems from two whistleblower lawsuits, U.S., et al., ex rel. Kieff v. Wyeth Pharmaceuticals, Inc., and  U.S., et al., ex rel. William St. John LaCorte v. Wyeth, which were filed in the U.S. District Court for the District of Massachusetts. The United States, 35 states and the District of Columbia intervened in the lawsuits.

Wyeth, Inc. was a Delaware corporation with its headquarters in Madison, New Jersey. Pfizer, Inc. is a Delaware corporation headquartered in New York. Pfizer acquired Wyeth, Inc., in 2009 following the conduct alleged in the lawsuits. At all relevant times, Wyeth distributed, marketed and/or sold pharmaceutical products in the United States, including Protonix Oral and intravenous Protonix IV. Protonix Oral and Protonix IV are in a class of drugs called proton pump inhibitors, which inhibit the production of gastric acid.

The Medicaid Prescription Drug Rebate Program was enacted by Congress in 1990 as a cost containment measure for Medicaid’s payment for outpatient drugs. The Medicaid Drug Rebate Program requires participating pharmaceutical manufacturers to pay quarterly rebates to state Medicaid programs for each of its drugs sold to pharmacies that were reimbursed by Medicaid. The quarterly rebate was determined from each pharmaceutical manufacturer’s reported “best price,” or the lowest price for which it sold a covered drug in a particular quarter.

In their court filings, the government plaintiffs alleged that during the third quarter of 2001 through 2006, Wyeth sold Protonix Oral tablets and Protonix IV to hospitals at discounted prices. The governments alleged that Wyeth’s contracts with the hospitals created a bundled sale under the terms of the Medicaid Drug Rebate Agreement by linking discounts available to participating hospitals for Protonix IV to discounts on Protonix Oral tablets.

However, Wyeth did not treat the sales of Protonix Oral tablets and Protonix IV as bundled within the meaning of the Medicaid Drug Rebate Program, and therefore failed to properly allocate the discounts available under the contract. As a result of this failure, Wyeth falsely reported its best prices for Protonix Oral tablets and Protonix IV, thereby causing the unit rebate amount for Protonix Oral tablets and Protonix IV, which is used to determine the quarterly rebate to pay the state for each drug, to be understated during the relevant period. The governments alleged that Wyeth concealed, avoided or decreased its obligation to pay Medicaid drug rebates to the state for Protonix Oral tablets and Protonix IV.

Because the Medicaid program is jointly funded by the federal and state governments, Pfizer will pay in excess of $413 million of the $784.6 million to the United States.

The state settlements were negotiated by a team of states led by representatives from the Office of the Attorneys General for New York, North Carolina, Indiana and the Commonwealth of Massachusetts. They also worked with the Department of Justice, the U.S. Attorney’s Office for the District of Massachusetts and the U.S. Department of Health and Human Services Office of Inspector General.

Pfizer reached out to FOX43 to give a statement on the matter.  A company spokesperson emphasized that this agreement was previously disclosed in February and that the charge was recorded in our fourth quarter of 2015.

“We are pleased to have finalized the agreement to resolve these cases, which involve historic conduct that occurred at least 10 years ago, before we acquired Wyeth,” said Doug Lankler, Executive Vice President and General Counsel. “The resolution of these claims reflects our desire to put these historic cases behind us and to focus on the needs of patients.”