DOJ settles drug pricing allegations with McKesson for $190 million

by Ben Vernia | April 27th, 2012

On April 26, the Department of Justice announced that it had reached a settlement of fraud allegations relating to drug pricing with the pharmaceutical firm McKesson Corp. According to DOJ’s press release:

McKesson Corporation has agreed to pay the United States more than $190 million to resolve claims that it violated the False Claims Act by reporting inflated pricing information for a large number of prescription drugs, causing Medicaid to overpay for those drugs.

Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division; New Jersey U.S. Attorney Paul J. Fishman; and Daniel R. Levinson, Inspector General of the U.S. Department of Health and Human Services announced the settlement today.

The government alleges that McKesson, a large drug wholesaler, reported the inflated pricing data to First DataBank (FDB), a publisher of drug prices that are used by most state Medicaid programs to set payment rates for pharmaceuticals.

The Medicaid program is funded jointly by the federal and state governments. This settlement resolves claims based on the federal share of Medicaid overpayments caused by McKesson’s conduct. In addition to the $190 million – which represents the $187 million settlement and interest – state governments can separately negotiate with McKesson to resolve claims based on the states’ shares of the Medicaid overpayments.

The drug pricing data at issue here relates to the “Average Wholesale Price” (AWP) benchmark used by Medicaid and other programs to set payment rates for pharmaceuticals. The settlement announced today is based on the United States’ allegations that McKesson reported inflated mark-up percentages to FDB for a wide variety of brand name drugs, causing FDB to publish inflated AWPs for those drugs.

To date, federal and state governments have recovered more than $2 billion from drug manufacturers that were alleged to have reported inflated AWP information to FDB and other publishers of drug prices.

The case apparently began as a government investigation, and not a whistleblower suit.

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