For Immediate Release - May 02, 2016

AG Announces Largest Medicaid Fraud Recovery in State History: Wyeth and Pfizer to Pay $68 Million Over Drug Pricing Claims

Payment Part of Multistate and Federal Settlement Totaling $784.6 Million

BOSTON – In the largest Medicaid fraud recovery in state history, pharmaceutical manufacturer Wyeth, Inc., a wholly owned subsidiary of Pfizer, Inc., has agreed to pay nearly $68 million to the Massachusetts Medicaid program (MassHealth) to resolve claims that it knowingly underpaid mandated drug rebates, Attorney General Maura Healey announced today. The payment is part of a joint multistate and federal settlement totaling $784.6 million.

“This historic settlement is the result of years of hard-fought litigation in Massachusetts to recover millions of taxpayer dollars that provide healthcare to our most vulnerable citizens,” AG Healey said. “We will continue to work with our federal and state partners to ensure that pharmaceutical companies doing business in Massachusetts play by the rules and don’t shift costs to the public for their own profit.”

MassHealth is jointly funded by Massachusetts and the federal government and pays for health care products and services for eligible low-income individuals, including people with disabilities, children and elder citizens. 

Pfizer acquired Wyeth in 2009, after the conduct alleged in the lawsuits. 

The settlement will resolve allegations that Wyeth engaged in an unlawful scheme to reduce the amount of the rebates it was required to pay to the state Medicaid programs between 2001 and 2006 for the sales of its product Protonix, one of a class of drugs known as proton pump inhibitors that are used to treat patients suffering from excessive production of gastric acid. 

The Medicaid Prescription Drug Rebate Program was enacted by Congress in 1990 to help reduce the costs incurred by the state and federal governments in providing prescription medications to Medicaid patients. The program requires a participating pharmaceutical manufacturer to pay quarterly rebates to state Medicaid programs for each of its drugs sold to pharmacies and subsequently paid for by Medicaid. The amount of the quarterly rebate for brand-name drugs, including Wyeth’s Protonix, is based in part upon the manufacturer’s reported “best price,” the lowest retail price available for the drug in a particular calendar quarter.

The government plaintiffs allege that Wyeth’s underpayment of rebates was due to its failure to report accurate “best prices” on the bundled sales of Protonix Oral Tablets and Protonix IV to hospitals throughout the country as required by the program. Wyeth failed to properly allocate the discounts available under the contracts and falsely reported its best prices, resulting in a substantial reduction of the rebate amounts it paid to the state Medicaid programs.

The investigation into these allegations began after two whistleblower lawsuits 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 in 2009, and AG Healey’s Medicaid Fraud Division played a significant role in carrying the litigation forward on behalf of the states.

Under the terms of the national settlement, Wyeth has agreed to pay a total of $784.6 million to the United States and the states involved. Because the Medicaid program is jointly funded by the federal and state governments, Wyeth will pay in excess of $413 million to the U.S. government. The states involved will receive $371 million of the settlement. Nearly $68 million will be paid to resolve claims relating to the Massachusetts Medicaid program.

The settlement is the result of investigation, litigation and settlement negotiations undertaken by the U.S. Attorney’s Office for the District of Massachusetts, the Civil Frauds Division of the U.S. Department of Justice, and a team of attorneys and data analysts from the offices of a number of state Attorneys General. Assistant Attorney General Steven Sharobem of AG Healey’s Medicaid Fraud Division served as one of the principal litigators on behalf of the states in connection with these cases, and as one of the lead negotiators of the settlement for the states. Other members of the state team included Assistant Attorneys General and data analysts from California, Indiana, New York, North Carolina and South Carolina.

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