Massachusetts AG Announces $2.9 Million Settlement With Drug Company To Resolve Price Reporting Litigation

April 20, 2007 -- BOSTON – Massachusetts Attorney General Martha Coakley announced today that California-based Dey, Inc., a manufacturer of generic pharmaceuticals, has paid the Commonwealth of Massachusetts $2.9 million to settle litigation pending in the Federal District Court in Boston. The Commonwealth sued Dey for allegedly inflating the "wholesale acquisition cost" (WAC) it reported to national price reporting services. The Commonwealth alleged that by reporting the inflated prices, Dey caused the Massachusetts Medicaid program to pay inflated amounts for Dey drugs dispensed by pharmacies to Medicaid recipients.

"We will not allow pharmaceutical companies to unfairly game the Medicaid price reporting system. In a time when health care costs are skyrocketing nationwide, we are committed to aggressively ensuring that taxpayer dollars are protected," Attorney General Martha Coakley said.

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All state Medicaid programs and the Federal Medicare program use the prices reported by manufacturers to national price reporting services as the basis for their payments to pharmacies and other drug providers. By increasing its reported prices, a manufacturer can increase the "spread," the difference between the provider's cost and the price a purchaser pays for the drugs, or profit, without having to lower its own prices. This enables the manufacturer to increase its market share at the expense of third-party payors such as Medicaid. This general type of fraud was discovered through investigations by federal authorities and whistle-blower litigation in other states; the specifics of the Massachusetts case were uncovered by the Commonwealth's Medicaid Fraud Control Unit in coordination with other federal and state law enforcement authorities.

Dey develops, manufactures and markets sterile, unit dose inhalation solution prescription drug products for the treatment of respiratory diseases and related allergies. The company’s products are marketed to large institutional purchasers, wholesalers, group purchasing organizations, chain pharmacies, health maintenance organizations and home health care organizations

Under the terms of the settlement, Dey has agreed to pay the Commonwealth $ 2.9 million and a 5% rebate on future purchases for a period of five years. In agreeing to the settlement, Dey denied any wrongdoing and asserted that its price reporting was consistent with all legal standards.

The litigation was prosecuted and settled by the Medicaid Fraud Control Unit in the Office of the Attorney General.

Source: Massachusetts Attorney General