For Immediate Release - December 20, 2011

Lawsuit Over Inflated Drug Prices Ends, AG Coakley Recovers $47 Million for Medicaid Program

After AG’s Office Wins Trial, Merck to Pay $24 Million; Last of Thirteen Companies to Settle; Largest Single-Case Medicaid Fraud Recovery in State History

BOSTON – A lawsuit against thirteen drug manufacturers over inflated prices has ended with more than $47 million recovered for the Medicaid Program, Attorney General Martha Coakley announced today.  Merck & Co., Inc. (Merck), the nation’s second largest drug manufacturer, has agreed to pay $24 million, making this the largest single payment to Massachusetts for one Medicaid fraud case in state history. 

Merck is the final company to settle this False Claims Act lawsuit brought by the AG’s Medicaid Fraud Division against thirteen generic drug manufacturers for knowingly reporting inflated prices to industry price reporting services between 1995 and 2003.  Merck and its generic drug subsidiary, Warrick Pharmaceuticals Corporation (Warrick), agreed to this $24 million settlement after a favorable jury verdict for the Commonwealth in Federal District court in Boston last year.  The twelve other manufacturers settled prior to trial. 

“Our office will continue to hold accountable those who defraud the Medicaid program and taxpayers by inflating and fraudulently reporting drug prices," said AG Coakley. "By taking this case to trial and winning a favorable verdict, we were able to recover millions of dollars for the state's Medicaid program. We remain committed to rooting out fraud to ensure that healthcare resources are available to those who desperately need them.” 

The AG’s lawsuit in this latest case alleged that Merck (f/k/a Schering-Plough Corporation), its wholly-owned subsidiary, Schering Corporation, and Warrick reported false and inflated prices for three albuterol products, a drug widely used to treat asthma and other respiratory diseases, to industry price reporting services, including First Data Bank.  Numerous private health insurance plans, and more than 40 state Medicaid programs, including Massachusetts, use these prices to determine reimbursement to pharmacies for prescriptions filled with a pharmaceutical manufacturer's drugs.

On September 30, 2010, following a 3 week trial, a jury in U. S. District Court in Boston returned a verdict in favor of the Commonwealth, awarding $4.6 million in damages to the Massachusetts Medicaid program, which is known as MassHealth. In May, 2011, following post-verdict motions, U.S. District Judge Patti B. Saris, who presided over the case, entered judgment in favor of the Commonwealth in the amount of $18 million, which included the award of treble damages, civil penalties and pre-judgment interest. Both the Commonwealth and Merck filed notices of appeal from the $18 million judgment. As part of this settlement, both sides have agreed to withdraw their appeal and end the litigation.

The lawsuit, which was filed in 2003 against Warrick and 12 other generic drug manufacturers, has resulted in the recovery of more than $47 million to the Medicaid program. The Commonwealth has also settled with twelve other defendants --Mylan, Inc.; Par Pharmaceutical, Inc.;  Actavis Elizabeth LLC; Dey, Inc.; Barr Laboratories, Inc.; Duramed Pharmaceuticals, Inc; Ethex Corporation; Roxane Laboratories, Inc.; Teva Pharmaceuticals USA, Inc.; Ivax Corporation; Watson Pharma, Inc., and Watson Pharmaceuticals, Inc.— recovering a total of $23.4 million from those companies.

In December 2009, the federal government consented to the settlement of a related federal whistleblower False Claims Act case against Merck over similar misconduct connected to inflated pricing. This federal settlement resulted in the recovery of $44.5 million to the United States for the Medicaid program nationwide.  The AG’s lawsuit against Merck returned $24 million to the Commonwealth alone.

Attorney General Coakley's Medicaid Fraud Division has been a leader, nationally, in recoveries from pharmaceutical manufacturers and other providers for fraud on the Medicaid program. Since 2007, Attorney General Coakley's Office has recovered more than $210 million on behalf of the Massachusetts Medicaid program. Medicaid is a government run healthcare program for the poor, elderly and disabled, which is jointly funded by the states and the federal government.

This case was prosecuted by Assistant Attorneys General Peter A. Mullin, K. Nathaniel Yeager, Robyn Pozza Dollar, John Pina III and Steven T. Sharobem, with the assistance of Investigators John H. Walsh, Steven Devlin and Anthony Megathlin, all of the AG’s Medicaid Fraud Division. Dr. Paul Jeffrey, MassHealth's Director of Pharmacy, and his staff, played a major role over many years in assisting with the investigation and prosecution of this case.


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