Attorney General Charlie Crist News Release
April 17, 2003
Media Contact: Sandi Copes
Phone: (850) 245-0150
Attorney General Settles Significant Medicaid Fraud Case
– GlaxoSmithKline, Bayer agree to return $10.3 million to taxpayers –
Tallahassee – Attorney General Charlie Crist today announced that the Attorney General’s Office has reached settlement agreements with GlaxoSmithKline and Bayer Corporation for violating the federal Medicaid drug rebate statute. Florida will receive a total of $10.3 million distributed between the Attorney General’s Medicaid Fraud Control Unit and the Florida Agency for Health Care Administration.
"Companies that profit from Medicaid fraud are cheating taxpayers and harming patients," said Crist. "Let this historic settlement serve as a warning to others that if you commit fraud in Florida, you will face stiff penalties."
These companies failed to report the "best price" information for their products and failed to pay sufficient rebates to the state Medicaid programs in connection with their private labeling of certain drugs for health maintenance organizations (HMOs). Medicaid is the federal/state health care insurance program that provides health care coverage for the economically disadvantaged. "Best price" is the lowest price a manufacturer offers its products for sale to commercial purchasers.
The Medicaid drug rebate statute is designed to return money to the Medicaid program in the form of rebates from drug manufacturers. In order to have their pharmaceuticals eligible for Medicaid payment, all pharmaceutical manufacturers must provide "best price" information to the Centers for Medicare and Medicaid Services (CMS). The CMS uses this "best price" information to calculate rebates payable to the state Medicaid program.
The Florida settlement is part of a National Association of Medicaid Fraud Control Units effort, which includes 49 states and the District of Columbia. The national settlement represents one of the largest Medicaid fraud settlements in history, totaling $335.3 million.
Both Bayer and GlaxoSmithKline sold products to HMOs at deeply discounted prices, and then concealed and avoided their obligation to pay additional rebates to the Medicaid programs. This was accomplished by re-labeling and re-packaging these drugs under the HMO’s private label. This fraud scheme is also known as "lick and stick."
GlaxoSmithKline
The U.S. Attorney’s Office for the District of Massachusetts conducted an investigation into alleged improprieties relating to the reported best price for Flonase, a nasal spray, and Paxil, an anti-depressant. Flonase was manufactured and sold by Glaxo Wellcome and Paxil was manufactured and sold by SmithKline Beecham. These two companies merged and became GlaxoSmithKline in December 2001.
Through a private labeling agreement with Kaiser Permanente, an HMO in California, Glaxo Wellcome manufactured, packaged and shipped Flonase to Kaiser, but substituted the Kaiser unique identifying number for the Glaxo Wellcome unique identifying number on the label. The purpose of the private labeling arrangement was to provide Kaiser additional price discounts on Flonase without having to report the discounted price as Glaxo Wellcome’s best price, thereby avoiding the obligation to pay additional rebates to Medicaid under the Medicaid rebate program.
Similarly, SmithKline began the private labeling of Paxil for Kaiser. Paxil was manufactured, packaged and shipped by SmithKline to Kaiser, but SmithKline substituted Kaiser’s unique identifying number for SmithKline’s unique identifying number on the label. SmithKline provided Kaiser additional price discounts on Paxil without reporting the newly discounted price to the Medicaid rebate program, thereby avoiding payment of additional rebates.
The total civil settlement amounts to $87,600,922 in damages and penalties to the federal government and the states. In addition, GlaxoSmithKline will enter into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services, Office of Inspector General that includes a requirement to certify its best price methodology. This will add a new responsibility for the manufacturer, enhance future state enforcement and better protect taxpayer funds.
Bayer Corporation
A complaint was filed in federal district court in Boston in February 2000 and the U.S. Attorney’s Office conducted an investigation into alleged improprieties relating to the reporting of best price for two of Bayer’s drugs: Cipro, an antibiotic, and Adalat CC, an anti-hypertensive. Bayer agreed to private label Cipro and Adalat CC for Kaiser and to sell these drugs to Kaiser at a discounted price. Bayer also agreed to private label Adalat CC for PacifiCare, also an HMO, and sell the private-labeled Adalat CC to PacifiCare at a discounted price.
Bayer has agreed to pay $242,126,570 in damages and penalties to the federal and state governments for knowingly misreporting its best price and underpaying its Medicaid rebates for Cipro and Adalat CC that was private labeled for Kaiser and PacifiCare from its determination of best price. Bayer will plead guilty to a charge of violating the Food, Drug and Cosmetics Act in federal district court in Boston. The government will recommend that Bayer pay a fine of $5,590,800.
An addendum with new obligations will be added to Bayer’s current Corporate Integrity Agreement with the U.S. Department of Health and Human Services, Office of Inspector General, including the Corporate Integrity Agreement that requires Bayer to certify its best price methodology. This new responsibility will enhance future state enforcement and better protect taxpayer funds.