Tuesday, July 31, 2012

Drug Distributor Agrees to $151 Million False Claims Act Settlement

Drug distribution company McKesson Corporation will pay $151 million in restitution to several states for over-billing Medicaid programs.   New York State will receive $64 million of the multi-state settlement.

The settlement resolves charges that McKesson violated state and federal False Claims Acts by reporting inflated pricing information for over 1,400 brand name prescription medications, causing the states' Medicaid programs to overpay for those drugs.

The drug pricing data at issue relate to the “Average Wholesale Price” (AWP) benchmark used by most states to set payment rates for pharmaceuticals.   The settlement today is based on the charges that McKesson reported inflated mark-up percentages to FDB for hundreds of brand name drugs, causing FDB to publish inflated AWPs for those drugs.  The investigation revealed that McKesson inflated the prices of over 1,400 brand name drugs, including commonly prescribed medications such as Adderall, Allegra, Ambien, Celexa, Lipitor, Neurontin, Prevacid, Prozac, and Ritalin.

The states alleged that for several years ending in 2009, McKesson, a large drug distributor, reported inflated pricing data to First Data Bank (FDB), a publisher of drug prices that are used by states to set payment rates for pharmaceutical reimbursement under Medicaid.

In April, the federal government reached an agreement with McKesson to resolve claims that the federal portion of Medicaid overpaid for these drugs.  The latest settlement agreement resolves the state portion of Medicaid for New York and 29 other states.

John Howley
New York, New York

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