Office of the Attorney General News Release Archive

Tuesday, January 23, 2001


Manufacturer to Reimburse State for Medicaid-Related Overbillings

AUSTIN - Texas Attorney General John Cornyn today announced that the state of Texas has reached a settlement with pharmaceutical giant Bayer Corp. that will recover $1.03 million and resolves years of overpayments for products covered by the Texas Medicaid program.

Texas, numerous other states and the federal government have entered into an agreement whereby Bayer will pay $14 million for claims arising out of Medicaid reimbursements for intravenous blood products manufactured by Bayer. Since Medicaid is funded by both the states and the federal government, the proceeds of the settlement are split. Of the amount, more than $1 million will be credited to Texas.

"This case sends out a strong signal that the taxpayers of Texas will not subsidize fraudulent acts that illegally pump up profits of Medicaid providers," said Attorney General Cornyn. "My office is putting companies like Bayer on notice that they must file complete, accurate information with the state on product pricing for Medicaid purposes. My office is continuing its investigation of other companies suspected of engaging in the same kind of practices," said Attorney General Cornyn.

Bayer manufactures, markets and sells intravenous biological fluids to health care providers, drug wholesalers and drug distributors. Texas requires a manufacturer such as Bayer to report the price at which it sells its product to wholesalers and distributors. Texas uses this information to estimate the acquisition costs of providers and reimburses Medicaid providers at estimated cost. However, Bayer represented to the state of Texas that the sale price of these products was much higher than the price paid to Bayer by its wholesale customers.

The Attorney General's office has maintained that Bayer knowingly engaged in a marketing scheme to report the wholesale price of these products at levels far higher than the vast majority of its customers paid Bayer for them. In doing so, Bayer's customers received reimbursements from the state Medicaid program far in excess of their actual costs.

Attorney General Cornyn formed the Civil Medicaid Fraud and Collection Section in 1999, and until that time, the provisions of the Medicaid Fraud Prevention Act of 1995 had not been actively used. The act provides for severe penalties for those engaging in Medicaid fraud, including automatic treble damages, attorneys' fees and civil penalties up to $10,000 per violation.

The investigation was conducted by the Civil Medicaid Fraud and Collection Section of the Attorney General's Office and the Texas Health and Human Services Commission and the Texas Department of Health.

Cornyn has previously sued three other drug manufacturers - Warrick Pharmaceuticals, Dey and Roxane Laboratories - for similar conduct. That consolidated district court case is pending in Travis County, and the state is seeking recovery of $79 million.

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Contact Mark Heckmann, Tom Kelley or Jane Dees at (512) 463-2050.
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