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Settlement Announced with Wyeth and Pfizer

May 2, 2016 - 10:19 PM

COLUMBUS - Ohio Attorney General Mike DeWine announced today that Ohio has reached an agreement in principle to settle allegations against Wyeth and Pfizer Inc., that will result in a combined state and federal settlement amount of nearly $25 million for Ohio. 
The settlement will resolve allegations that Wyeth knowingly reported false and fraudulent prices on two of its proton pump inhibitor drugs, Protonix Oral and Protonix IV, between 2001 and 2006.  Under the settlement Wyeth agreed to pay $784.6 million, with more than $371 million of this amount going to the Medicaid program, and $24,943,901.24 to the Ohio Medicaid program.
The settlement stems from two whistleblower lawsuits which were filed in the United States District Court for the District of Massachusetts.  The United States, 35 states, and the District of Columbia intervened in the lawsuits.  
Pfizer, which is headquartered in New York City, acquired New Jersey- based Wyeth in 2009; some three years after Wyeth had ended the conduct that gave rise to the settlement. Protonix Oral and Protonix IV are in a class of drugs called Proton Pump Inhibitors (PPIs) 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 Medicaid Drug Rebate Program requires participating pharmaceutical manufacturers to report to the government the best prices they offer other customers for their brand name drugs. Based on these reported best prices, the drug companies pay rebates to the state Medicaid programs so that Medicaid, a large purchaser of drugs, receives the benefit of the same discounts drug companies offer to other large customers in the marketplace. 
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 deeply discounted prices. The government 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.  The government alleges Wyeth’s motivation to do this was that it wanted to control the hospital market so that patients discharged from the hospital on Protonix Oral were likely to stay on the drug for long periods of time, rather than switch to competing PPIs, during which time payers, including Medicaid, would pay nearly full price for the drug. 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 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, of which nearly $25 million will go to the Ohio Medicaid program.
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