DoJ, 16 States Sue Wyeth for Medicaid 'Best Price' Violations

John Commins, for HealthLeaders Media , May 19, 2009

The Department of Justice and 16 states have joined two whistleblower suits against Wyeth, alleging the drug maker knowingly failed to give the government discounts it provided to private purchasers, a violation of Medicaid law.

As a result of the alleged scheme, Wyeth avoided paying hundreds of millions in rebates to state Medicaid programs for the bundled use of its proton pump inhibitors Protonix Oral and Protonix IV, said the Justice Department in a media release.

Tony West, assistant attorney general for the Civil Division at Justice, says Wyeth "created the Protonix bundle so they could increase their market share at the expense of the Medicaid program--a program to provide the least advantaged Americans with necessary medical care and services."

"By offering massive discounts to hospitals, but then hiding that information from the Medicaid program, we believe Wyeth caused Medicaid programs throughout the country to pay much more for these drugs than they should have," West says.

In response to the suits, Wyeth spokesman Doug Petkus tells HealthLeaders Media, "Wyeth believes its pricing calculations were correct and intends to vigorously defend itself in these actions."

Under the Medicaid Drug Rebate Program, brand name drug makers must offer the government the "best price" offered to private payers for their drugs. They also are required to pay rebates to the state Medicaid programs that are calculated on any discounted prices that are offered.

Federal investigators claim that, between 2000 and 2006, Wyeth offered steep discounts to thousands of hospitals nationwide for Protonix Oral and Protonix IV under a pricing arrangement known as the "Protonix Performance Agreement." The arrangement required that hospitals purchase the drugs together under a bundled arrangement in exchange for a steep discount. Investigators say Wyeth did this to access the lucrative retail outpatient market, intending that patients who used the intravenous version of Protonix in the hospital would later purchase Protonix Oral once they were discharged.

Under the Protonix Performance Agreement, hospitals that placed both products on their formularies and attained certain market share requirements were entitled to up to a 94% discount off the list price of Protonix Oral and up to 80% off the list price of Protonix IV. Although Wyeth was required to pass along the benefit of the lowest prices to the state Medicaid programs, they didn't and therefore avoided paying hundreds of millions of dollars to Medicaid in quarterly rebates, investigators allege.

Two separate civil False Claims Act suits–called qui tam actions–were filed against Wyeth in Massachusetts. California, Delaware, the District of Columbia, Florida, Illinois, Indiana, Louisiana, New York, Michigan, Nevada, New Hampshire, Tennessee, Texas, Virginia, and Wisconsin also have joined the whistleblower suits.

John Commins is a senior editor with HealthLeaders Media.

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