Federal healthcare programs have rules to prevent overcharging, but pharmaceutical companies sometimes attempt to circumvent these rules so that they make higher profits at the expense of the taxpayers who fund the programs.  

Under the Medicaid Drug Rebate Program, a pharmaceutical manufacturer must pay quarterly rebates to each state whose Medicaid program purchases the manufacturer’s drugs. For each drug, the size of the quarterly rebate depends on, among other things, whether the drug is branded or generic, the difference between the average manufacturer price (AMP) and the best price given to any commercial customer, and whether the price of the drug has risen faster than the rate of inflation.

Whistleblowers have brought False Claims Act qui tam cases involving the Medicaid Drug Rebate Program that have resulted in hundreds of million dollars in recoveries. For example, as an Assistant United States Attorney, Newman & Shapiro attorney Gregg Shapiro resolved some of the largest-ever Medicaid rebate qui tam cases, including:

  • a $784.6 million settlement to resolve allegations that Wyeth used inflated best prices to underpay Medicaid rebates for Protonix oral and Protonix IV; and
  • a $465 million settlement to resolve allegations that Mylan avoided paying Medicaid rebates by misclassifying EpiPen as a generic drug rather than as a branded drug.

Meanwhile, for any physician-administered drug covered by Medicare Part B, the pharmaceutical manufacturer must make quarterly reports of the drug’s Average Sales Price (ASP). Because physicians who purchase and administer such a drug generally receive Medicare reimbursement of 106% of the drug’s ASP (including the patient co-insurance amount), a physician makes more money when the “spread” grows between the ASP and the physician’s actual purchase price for the drug. To maintain or increase this spread – and to make their drugs more attractive to the profit-conscious physicians who purchase them – pharmaceutical manufacturers sometimes avoid reporting discounts that would cause their drugs’ ASPs to fall. For example, as an Assistant United States Attorney, Newman & Shapiro attorney Gregg Shapiro negotiated a $109 million settlement with Sanofi to resolve a False Claims Act whistleblower’s allegations that, among other things, the company effectively reduced the price of its drug, Hyalgan, by giving physicians free units of the drug disguised as “samples,” but failed to consider the value of those free units when it reported Hyalgan’s ASP to Medicare.

Pharmaceutical companies also may try to give physicians hidden discounts by passing them through distributors who do not have to report ASP. For example, to allow doctors to get rebates from their credit companies when they purchase expensive drugs, pharmaceutical companies may reimburse distributors for credit card processing fees they incur when physicians purchase drugs with credit cards.  

Whistleblowers who have worked for pharmaceutical companies, pharmaceutical distributors, pharmacies, or physician practices may have become aware of fraudulent price reporting schemes. If you have information about a pharmaceutical company that has reported fraudulent drug prices to a federal healthcare program, please contact us here or at 617-917-2875.