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WYETH AND PFIZER AGREE TO PAY $784.6 MILLION TO RESOLVE ALLEGATIONS OF UNDERPAYING REBATES OWED UNDER THE MEDICAID DRUG REBATE PROGRAM
March 20, 2005
AUGUSTA – Attorney General Janet T. Mills announced today that Maine has reached an agreement in principle to settle allegations against the drug-maker Wyeth, a wholly owned subsidiary of Pfizer, Inc. The settlement will resolve allegations that Wyeth knowingly underpaid rebates owed under the Medicaid Drug Rebate Program for the sales of Protonix Oral and Protonix IV between 2001 and 2006. Under the settlement Wyeth has agreed to pay $784.6 million to the United States and the States. Over $371 million of this amount will go to the Medicaid Program. Maine will recoup approximately $22.6 million in total for state and federal taxpayers, including approximately $7.7 million for restitution to the MaineCare Program and other recoveries.
“This significant victory holds this pharmaceutical company accountable and protects our tax dollars,” said Attorney General Mills. “Maine’s Medicaid Fraud Control Unit played a key role in bringing this litigation to a successful end. Maine and the federal government spend nearly $2.5 billion dollars in the MaineCare program every year. It is critical that we ensure taxpayers are getting the full benefit of the Medicaid Drug Rebate Program, maximizing savings to the taxpayers.”
The settlement stems from two whistleblower lawsuits, U.S., al., ex rel. Kieff v. Wyeth Pharmaceuticals, Inc., Civ. No. 03-cv-12366, and U.S., , et al., ex rel. William St. John LaCorte v. Wyeth, Civ. No. 06-cv-11724, filed in the United States District Court for the District of Massachusetts. The United States, 35 states and the District of Columbia intervened in these lawsuits.
Wyeth, Inc. was a Delaware corporation with its headquarters in Madison, New Jersey. Pfizer, Inc. is a Delaware corporation headquartered in New York, New York, which acquired Wyeth, Inc., in 2009, after the conduct alleged in the lawsuits. At all relevant times, Wyeth distributed, marketed and/or sold pharmaceutical products in the United States, including Protonix Oral and intravenous Protonix IV, which are in a class of drugs called Proton Pump Inhibitors which inhibit the production of gastric acid.
The Medicaid Prescription Drug Rebate Program was enacted by Congress in 1990 as a cost containment measure for Medicaid’s payment for outpatient drugs. The rebate program requires pharmaceutical manufacturers to pay quarterly rebates to State Medicaid programs based on the “Best Price,” or the lowest price for which it sold a covered drug in a particular quarter.
In their court filings, the government plaintiffs alleged that during the third quarter 2001 through 2006, Wyeth sold Protonix Oral tablets and Protonix IV to hospitals at discounted prices. The governments alleged that Wyeth’s contracts with the hospitals created a bundled sale under the terms of the Medicaid Drug Rebate Agreement by linking discounts available to participating hospitals for Protonix IV to discounts on Protonix Oral tablets. However, Wyeth did not treat the sales of Protonix Oral tablets and Protonix IV as bundled within the meaning of the Medicaid Drug Rebate Program and therefore failed to properly allocate the discounts available under the contract. As a result of this failure, Wyeth falsely reported its Best Prices for Protonix Oral tablets and Protonix IV thereby causing the Unit Rebate Amount for Protonix Oral tablets and Protonix IV, which is used to determine the quarterly rebate to pay the State for each drug, to be understated during the Relevant Period. The governments alleged that Wyeth concealed, avoided or decreased its obligation to pay Medicaid Drug Rebates to the State for Protonix Oral tablets and Protonix IV.
Because the Medicaid program is jointly funded by the federal and State governments, Pfizer will pay in excess of $413 million of the $784.6 million to the United States. Maine’s recovery to state taxpayers of approximately $7.7 million is matched by approximately $14.9 million returned to the federal government.
Attorney General Mills praised Assistant Attorney General Valerie Wright, Assistant Attorney General Michael Miller and all of the staff of Maine’s Medicaid Fraud Control Unit for their work on this complex matter. Maine was heavily involved in this multistate litigation at key phases that ultimately brought the companies to offer a settlement.