Ken Paxton

Wednesday, June 11, 2003

Attorney General Recovers $18.5 Million In Medicaid Fraud Case

AUSTIN - Texas Attorney General Greg Abbott today announced that the State has reached a settlement with a pharmaceutical company that deliberately falsified price reports to the Texas Medicaid program for its products. Under terms of the agreement, Dey, Inc. will pay a total of $18,500,000, with more than $9 million going to the State. The remaining portion of the settlement will go to the federal government, which jointly funds the Texas Medicaid program and has reached its own settlement with the company.

Dey, a subsidiary of German pharmaceutical giant Merck KGaA, manufactures and markets inhalant products that are generally prescribed for persons suffering from respiratory illnesses. Under Texas law, drug manufacturers are required to report the prices at which they sell their products to wholesalers and distributors. The Texas Medicaid program then uses this pricing information as a basis for calculating provider cost and reimburses Medicaid providers accordingly. The attorney general's Civil Medicaid Fraud Section found that Dey deliberately falsified its pricing reports for the benefit of its customers, which directly led to overpayments by the Texas Medicaid program.

"Texas citizens will not tolerate this kind of behavior by those who wish to do business in the State," Attorney General Abbott said. "Our evidence against Dey was overwhelming, and we were more than prepared to go to court if necessary. I'm satisfied with the agreement because the State is going to get back every cent it overpaid as a result of unethical practices made at the expense of Texas taxpayers. In fact, under the settlement, the State will recover more than two times its damages, as well as all costs and attorneys' fees."

The State's case is based on information provided by industry insider Ven-a-Care of the Florida Keys, Inc., which initiated the action as a Relator under the Texas Medicaid Fraud Prevention Act. Ven-a-Care has also assisted the State and the federal government in obtaining previous settlements with Bayer Corp. and TAP Pharmaceuticals, Inc.

In addition to the monies recovered from Dey for its past violations, the Texas Medicaid program will save millions of dollars in the future as a result of evidence the attorney general's office uncovered in its investigation. The attorney general's lawsuit against two other drug manufacturers - Warrick Pharmaceuticals and Roxane Laboratories - is still pending before Travis County District Judge Suzanne Covington. The case is set for trial in August.