AstraZeneca, Teva's Cephalon Settle Allegations Of Underpaying Medicaid Rebates

(RTTNews) - AstraZeneca (AZN.L, AZN) has agreed to pay the United States and participating states a total of $46.5 million, plus interest, to resolve allegations that it knowingly underpaid rebates owed under the Medicaid Drug Rebate Program, the U.S. Justice Department announced. Of that amount, AstraZeneca will pay roughly $26.7 million, plus interest, to the United States, and the remainder to states participating in the settlement.

In a separate settlement arising out of the same case, Cephalon Inc., which is now owned by Teva Pharmaceutical (TEVA), has agreed to pay the United States and participating states a total of $7.5 million, plus interest, to resolve similar allegations. Of that amount, Cephalon will pay roughly $4.3 million, plus interest, to the United States, and the remainder to states participating in the settlement.

Pursuant to the Medicaid Drug Rebate Program, drug manufacturers are required to pay quarterly rebates to state Medicaid programs in exchange for Medicaid's coverage of the manufacturers' drugs. The quarterly rebates are based, in part, on the Average Manufacturer Prices or AMPs that the manufacturers report to the government for each of their covered drugs.

Generally, the higher the reported AMP for a drug, the greater the rebate the manufacturer pays to state Medicaid programs for the drug. These settlements resolve allegations that AstraZeneca and Cephalon underreported AMPs for a number of their drugs by improperly reducing the reported AMPs for service fees they paid to wholesalers. As a result, the government contends that AstraZeneca and Cephalon underpaid quarterly rebates owed to the states and caused the United States to be overcharged for its payments to the states for the Medicaid program.

The two settlements partially resolve a lawsuit filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery. The amounts to be received by the whistleblower in this suit, Ronald J. Streck, a pharmacist, have not yet been determined.