Ken Paxton

Wednesday, August 24, 2011

Attorney General Abbott Recovers $24.4 Million For State of Texas

AUSTIN Texas Attorney General Greg Abbott today recovered $24.4 million for the State’s general revenue fund.

In 2008, the Texas Attorney General’s Office charged Par Pharmaceutical Inc. of New Jersey and three other drug manufacturers with defrauding the Medicaid program by improperly reporting drug prices. Because the defendants provided inaccurate market prices for their drugs, the Medicaid program over-reimbursed pharmacies for Par’s products.

Texas’ case against Par Pharmaceutical was originally scheduled for trial in Travis County earlier this year. Today’s agreement resolves the State’s enforcement action without a lengthy and costly trial.

In a related case, a unanimous Travis County jury returned a verdict for the State against Par’s co-defendants last March. As a result, a state district court in Travis County entered a $182 million judgment against Alpharma USPD, which is now known as Actavis Mid-Atlantic LLC, and Purepac Pharmaceutical Corp., which is now known as Actavis Elizabeth LLC.

The Attorney General’s July 2008 enforcement action charged that the following defendants improperly reported their drug prices to the taxpayer-funded Medicaid program: Par Pharmaceutical Inc.; Watson/Schein Pharmaceuticals Inc. of California; Alpharma and Purepac of New Jersey; and Barr Pharmaceuticals Inc. of New York. The case against Barr settled last year, and a settlement with Watson is imminent. Alpharma and Purepac have announced they will appeal the court’s judgment finding that both manufacturers defrauded the Medicaid progam.

Since 2000, the Texas Attorney General’s Civil Medicaid Fraud team has investigated multiple pharmaceutical manufacturers for incorrectly reporting their products’ prices to the Medicaid program. The State’s legal action against Par is another of those drug-pricing cases.

Under state and federal law, drug manufacturers must file reports with the Medicaid program that disclose the prices they charge pharmacies, wholesalers and distributors for their products. The Texas Medicaid program uses manufacturer-supplied pricing information to estimate the amount that Medicaid should pay pharmacies for each supplier’s pharmaceutical products. Pharmacies bill the state-run, taxpayer-funded program for the cost of prescription drugs, plus dispensing fees. Medicaid reimburses pharmacies based on the manufacturer-reported pricing information.

When manufacturers improperly report market prices for their drugs, Medicaid reimburses pharmacies at vastly inflated rates. The difference between the reimbursement amount and the actual market price is referred to as the spread. The Attorney General’s enforcement action charged the defendant pharmaceutical companies with using their illegally created spreads which date back to the early 1990s to unlawfully induce pharmacies and other providers to purchase the defendants’ products, which reflects a fraud on the Medicaid program.

Under the agreement announced today, Par must pay $154 million to resolve enforcement actions filed by Texas and four other states. Under today’s agreement with Par, almost half of the total settlement approximately $71.8 million will be allocated to Texas, while the remaining $82.2 million will be shared by Florida, Kentucky, South Carolina and Alaska. Because Medicaid is jointly funded by the State and the federal government, the federal government is entitled to a portion of the Texas recovery, as well as each of the other participating states’ shares.

Under the Texas Medicaid Fraud Prevention Act, Ven-a-Care of the Florida Keys Inc. also receives a share of the Texas recovery because the relator-whistleblower uncovered the defendant’s fraudulent conduct. Additionally, the Office of the Attorney General will recover investigative and legal costs associated with its enforcement action.

To obtain more information about the Attorney General’s efforts to fight Medicaid fraud, access the agency’s Web site at