For Immediate Release - November 04, 2015

Pharmaceutical Companies to Pay $1.87 Million to MassHealth Over Drug Pricing Allegations

BOSTON – Two pharmaceutical companies will pay a total of $1.87 million to resolve claims that they underpaid drug rebates owed to MassHealth, Attorney General Healey announced today.

The AG’s Office joined with other states and the federal government in resolving allegations that AstraZeneca LP and Cephalon, Inc. violated state and federal False Claims Acts by manipulating price reporting to decrease rebates that they owed to state Medicaid programs. 

“These pharmaceutical companies were alleged to have manipulated reporting requirements in order to underpay rebates for their drugs,” AG Healey said. “This settlement brings critical funds back to our MassHealth program. We will continue to work to hold drug manufacturers accountable for their conduct and ensure that they comply with federal and state laws.”

Under a federal law known as the Medicaid Drug Rebate Program, drug manufacturers must periodically return a portion of the amount paid by state Medicaid programs for the manufacturers’ drugs. The rebate program is designed to ensure that states pay competitive prices for drugs. The rebate is calculated based on a percentage of the average price drug wholesalers pay for the manufacturer’s drugs. This average price, which the manufacturer reports to the federal government, is known as the Average Manufacturer’s Price (AMP). The greater the AMP reported by the manufacturer, the greater the rebate the manufacturer must pay. 

The settlements resulted from a qui tam action pursued by a whistleblower in the United States District Court for the Eastern District of Pennsylvania under the federal False Claims Act and various state false claims statutes. The complaint alleged that AstraZeneca and Cephalon falsely treated certain fees paid to wholesalers as “discounts,” and that the effect of this accounting practice was to improperly decrease the AMPs AstraZeneca and Cephalon reported to the federal government, enabling them to underpay rebates owed to the states.

Under the terms of its settlement, AstraZeneca will pay the United States and participating states a total of $46.5 million. Of that amount, AstraZeneca will pay roughly $1.75 million to MassHealth. In a separate parallel settlement, Cephalon will pay the United States and participating states a total of $7.5 million, including approximately $129,000 for MassHealth.

Assistant Attorney General Joshua Orr of AG Healey’s Medicaid Fraud Division served as principal negotiator on behalf of the states.  He was assisted by Assistant Attorney General Robert Patten, also of AG Healey’s Medicaid Fraud Division, and by Assistant Attorneys General and data analysts from Colorado, New York, Nevada, South Carolina, and Texas.