Ken Paxton

Monday, May 3, 2004

Attorney General Reaps $27 Millon Medicaid Fraud Settlement With Major Drug Maker

AUSTIN - Texas Attorney General Greg Abbott scored a major victory today in a long-fought battle with a giant of the pharmaceutical industry, winning Medicaid fraud recoveries of $27 million from Schering-Plough Corp. of New Jersey. Also included in this settlement are its subsidiaries, Schering Corp. and Warrick Pharmaceuticals Corp., the company’s generic prescription drug manufacturer.

Together with a June settlement involving Dey Inc., the Attorney General’s Civil Medicaid Fraud attorneys have recovered $45.5 million in a state whistleblower case involving schemes to falsify the wholesale pricing of generic drugs for Medicaid patients in order to increase company profits.

With these settlements, the state will recover approximately two times the damages suffered by the Texas Medicaid program as a result of the defendants’ unlawful acts, plus attorneys’ fees and costs. The whistleblower, or relator, that brought these practices to the government’s attention was Ven-a-Care of the Florida Keys Inc., a specialized pharmacy participating in that state’s Medicaid program.

Texas has taken the lead nationwide in pursuing this relatively new, but effective, enforcement of our laws, said Attorney General Abbott. Along with the Texas Health and Human Services Commission, we conducted an extensive investigation with little or no cooperation from the companies.

Today’s settlement ends almost four years of litigation with these defendants but enables Texas to reap the benefits of persistence in rooting out these practices, he added. In essence, the companies used this pricing scheme as a marketing tool to increase profits, with taxpayers picking up the tab.

The agreement requires the Schering companies to pay $27 million to Texas and the U.S. government to settle claims that the drug makers reported artificially inflated prices for prescription albuterol drugs to the Texas Medicaid program. This in turn led to inflated reimbursements to retail pharmacies and contributed to widely inflated prices for generic drugs, a key issue in health care debates nationwide.

Albuterols are broadly prescribed for adults and children with asthma and other chronic breathing disorders. The company’s inflated drug price reports resulted in the Texas Medicaid program overpaying by millions of dollars the pharmacies that dispensed the albuterol drugs to Medicaid patients.

The allegations brought by the Attorney General in this lawsuit were first brought to the state’s attention by the whistleblower (or relator) in this case, Ven-A-Care of the Florida Keys Inc.

Ven-A-Care has been instrumental in leading us to this orchestrated wrongdoing that has wasted taxpayer money for many years, Abbott added. I encourage more whistleblowers to step forward so we may bring the full measure of this law to bear on those who defraud the health care system.

Last June, a settlement with another original defendant, Dey Inc., a subsidiary of German pharmaceutical company Merck KgaA, resulted in federal and state recovery of $18.5 million for Dey’s falsifying of price reports for albuterols.

The state’s case against the remaining original defendant, Roxane Laboratories Inc., was moved to federal court in Boston and remains pending. The Attorney General also has ongoing investigations into the practices of numerous other drug manufacturers.

Qui tam cases using whistleblowers in Texas could not be pursued legally before 1997, when the Legislature strengthened the Texas Medicaid Prevention Act to allow for input from industry insiders. By taking the initial step of singling out lawbreakers within their industry, whistleblowers could be eligible for a percentage of damages recovered.

View State's lawsuit

View the settlement agreement