April 28, 2016

AG recovers record $46.7 million for the state Medicaid program from pharma co. Wyeth’s underpayments

Pharmaceutical company to pay $784.6 million to federal government, states

SEATTLE — Attorney General Bob Ferguson today announced the recovery of millions in overcharges to Washington by Wyeth, a pharmaceutical company owned by Pfizer, Inc. The agreement in principle resolves allegations the company knowingly underpaid rebates owed to Medicaid. After accounting for the federal government’s Medicaid program share, Washington will receive $22.9 million.

“I won’t allow waste, fraud and abuse to deplete taxpayer dollars,” Ferguson said. “My office will hold accountable big corporations that take scarce public healthcare dollars to pad their bottom line.”

Wyeth is accused of underpaying rebates owed under the Medicaid Drug Rebate Program for the sales of Protonix Oral and Protonix IV between 2001 and 2006. Both drugs are known as Proton Pump Inhibitors, which inhibit the production of gastric acid.

Today’s agreement stems from two whistleblower lawsuits (U.S. et al., ex rel. Kieff v. Wyeth Pharmaceuticals, Inc., Civ. No. 03-cv-12366, and U.S. et al., ex rel. William St. John LaCorte v. Wyeth, Civ. No. 06-cv-11724), which were filed in the United States District Court for the District of Massachusetts. Washington, 34 other states, the federal government and the District of Columbia intervened in the lawsuits.

Wyeth agreed to pay a total of $784.6 million back to the federal government and the intervening states. Washington’s share totals $46.7 million in federal and state Medicaid dollars. After accounting for the federal share of Washington’s Medicaid program, $22.9 million will come back to the state.

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.

Washington and the other states alleged that during the third quarter 2001 through 2006, Wyeth sold Protonix Oral tablets and Protonix IV to hospitals at discounted prices. Washington 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.

Wyeth did not, however, treat the sales as bundled for the purposes of calculating its Best Prices and, therefore, falsely understated the quarterly rebates due to Washington and the other states.

Pfizer, Inc. is a Delaware corporation headquartered in New York, NY. Pfizer acquired Wyeth, Inc., a Delaware corporation based in Madison, NJ, in 2009, after 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.

Washington was represented by Assistant Attorneys General Carrie Bashaw, Dawn Cortez and Aileen Miller.

Medicaid Fraud Control Act

One of the state’s most effective tools to combat Medicaid fraud is the Medicaid Fraud False Claims Act, which authorizes the Attorney General to bring civil cases against fraudulent providers to recover Medicaid funds.

Since the act’s passage in 2012, civil fraud recoveries have increased 28 percent, and the state has recovered $3 for every $1 invested in enforcement under the act.

The AGO has recovered $6.3 million that it otherwise would not have been able to without its authority under the FCA.

Last month, Governor Jay Inslee signed Attorney General Ferguson’s agency-request bill reauthorizing the act. Without action from the Legislature, the FCA would have expired June 30, 2016.

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The Office of the Attorney General is the chief legal office for the state of Washington with attorneys and staff in 27 divisions across the state providing legal services to roughly 200 state agencies, boards and commissions. Attorney General Bob Ferguson is working hard to protect consumers and seniors against fraud, keep our communities safe, protect our environment and stand up for our veterans. Visit www.atg.wa.gov to learn more.

CONTACT: Peter Lavallee, Communications Director, (360) 586-0725; PeterL@atg.wa.gov