On December 27, 2012, Pfizer and Endo finalized settlements with the State of Texas and the United States Government in a False Claims Act case that alleged the two companies defrauded Medicare and Medicaid. According to the Texas Attorney General's press release, the two pharmaceutical manufacturers agreed to pay a combined total of $50 million to the State of Texas, the U.S., and whistleblower Ven-A-care.
The payments are to settle a False Claims Act lawsuit originally filed by Ven-A-Care, the whistleblower, also known as a qui tam relator, on behalf of the United States and Texas. According to the suit, Endo and Pfizer submitted false statements to Medicare and Medicaid about the prices the companies were charging for some generic drugs that they manufactured. As a result, Medicare and Medicaid wound up paying more than they should have for the drugs.
As a whistleblower lawyer and a taxpayer, I was glad to see the government recovering some of the money it lost to fraud. The shocking part is how often pharmaceutical companies have been front and center in the False Claims Act area in recent years.
This particular fraud relates to how much Medicare and Medicaid have to pay for the drugs that are prescribed to people who are on those plans. If you are a Medicare or Medicaid beneficiary, then when you go to a drug store to pick up a prescription, Medicare or Medicaid reimburses the drug store/pharmacy for the cost of the medication, plus an amount on top of that price. That extra amount on top of the cost of the drug is called a "spread." Usually Medicare and Medicaid agree to pay the drug store chain a specific percentage or "scaled" payment above what the drug store chain itself paid for the drug. In order to do that accurately, of course, Medicare and Medicaid have to know how much the pharmacy, wholesaler or distributor paid for the drug. To fill in that missing piece of information, pharmaceutical companies are required to report how much they charged.
If the pharmaceutical company lies about the amount, and says it was larger than it really was, then Medicaid ends up reimbursing the drug store more than it should have. For example, let's say a drug manufacturer charges a drug store chain $10 for a drug. If Medicaid thinks that the drug store chain actually paid $20 for the drug, Medicaid's calculated payment to the drug store chain will be too high.
Don't get me wrong - usually these cases are not quite as straightforward as in that example. In fact, sometimes a pharmaceutical company will work out a pretty convoluted way to hide the fact that it really charged the drug store chain $10 for the drug. But the concept itself is easy to understand: the pharmaceutical company says it is charging $x for a drug, when it really is charging less than $x for the drug.
The Pfizer suit had initially been filed against three biotechnology companies, ESI Lederle, Lederle Labs, and Pharmacia Corp. Pfizer then bought the three companies.
The "relator" - meaning the party that revealed the fraud to the United States and sued on behalf of the U.S. - was Ven-A-Care of the Florida Keys, Inc. As the whistleblower, Ven-A-Care will get a percentage of what the governments recovered.
Raymond Winter, who is the Chief of the Civil Medicaid Fraud Division in Texas, signed the agreement on behalf of the Texas Attorney General. Dr. Kyle Janek, M.D., signed on behalf of the Texas Health & Human Services Commission.
As taxpayers, we owe Ven-A-Care a debt of gratitude for bringing this matter to the attention of the governments, so that we could get back some of the money that Medicare and Medicaid paid out solely because the drug companies gave a falsely-inflated price for the drug. The Florida company has been involved in exposing a number of schemes to defraud the federal government and the state governments through Medicare and Medicaid fraud.