Drugmakers agree to mutli-million dollar settlement on alleged Medicaid overcharges

Wednesday, April 16th 2003, 12:00 am
By: News On 6

BOSTON (AP) _ Drugmakers Bayer AG and GlaxoSmithKline have each agreed to pay a multi-million dollar Medicaid abuse settlement to resolve allegations they overcharged the government insurance program for the poor.

Bayer will pay the government about $250 million and Glaxo will pay about $88 million for failing to give Medicaid the lowest price charged to any consumer, according to the agreements.

Bayer on Wednesday confirmed the settlement, negotiated with the U.S. Attorney's office in Boston and Medicaid fraud investigators around the country. The company said it had set aside $257 million late last year to cover the costs.

``Throughout the investigation, Bayer cooperated fully with the government and we are now pleased to put this matter behind us,'' the company said in a statement.

The Boston Globe, citing unnamed federal investigators and others familiar with the case, reported Wednesday that Bayer was pleading guilty to violating the Federal Prescription Drug Marketing Act and paying a criminal fine of about $5 million for alleged overcharges involving its antibiotic Cipro and its high blood pressure drug Adalat. A company spokesman would not comment on the report Wednesday.

Glaxo, which was not accused of criminal wrongdoing, is paying a civil fine for overcharges involving its anti-depressant Paxil and nasal allergy spray Flonase.

The investigation focused on allegations that the companies hid their lowest prices from Medicaid by repackaging or relabeling their drugs under a middleman's name. The middleman then sold the drug at a deep discount not reported to the government. By law, the companies are required to report all their prices and then pay Medicaid a rebate if they charge anyone less than the government.

In a statement released Wednesday, Glaxo said it had agreed to an $87.6 million settlement.

The Philadelphia-based company said the sole issue in the case was how it interpreted ``an ambiguous aspect of the Medicaid Best Price Statute'' and how that statute was applied in limited arrangements with a single customer who repackaged a small number of its products. The company said it agreed to the civil settlement to avoid the delay and expense of a trial.

Company spokeswoman Mary Anne Rhyne said the single customer was a health maintenance organization that repackaged and sold Glaxo drugs. She said there was a difference of opinion between the government and Glaxo as to how the Medicaid pricing statute should be applied to the customer since it is both an HMO and a licensed manufacturer.

``GSK believes its interpretation of the statute was reasonable and was in good faith,'' she said.

Rhyne said the company terminated its arrangements with the HMO after the government issued a clarification of the Medicaid pricing statute in 2000.

Prosecutors were expected to officially announce the settlement Wednesday in Boston. A spokeswoman for the U.S. attorney's office did not immediate return a telephone call seeking comment Wednesday.

``The government and the Medicaid program depends upon the honesty of the companies in truly offering the lower prices, and here two companies have been found wanting,'' Dr. Peter Lurie, deputy director of Public Citizen's Health Research Group in Washington D.C., told The Associated Press.