Wyeth, Pfizer to Pay Michigan $17.1 Million to Resolve Allegations of Underpaying Rebates Owed To Medicaid Program

April 27, 2016

LANSING – Michigan Attorney General Bill Schuette announced today that Michigan and 34 other states have reached an agreement in principle to settle allegations against Wyeth, a subsidiary of Pfizer, Inc. The settlement will resolve allegations that Wyeth knowingly underpaid rebates owed under the Medicaid Drug Rebate Program for the sales, Protonix Oral and Protonix IV between 2001 and 2006. Both are drugs that are used to treat conditions such as acid reflux. Under the settlement Wyeth agreed to pay $784.6 million to the United States and the States. Over $371 million of this amount will go to the Medicaid Program. Michigan, one of 35 states in the law suits will receive $17,172,274.24 under the settlement.

“Gaming the system of drug pricing doesn’t work for Michigan taxpayers who paid more than needed to support the Medicaid program,” said Schuette. “Everyone must obey the law and there are consequences for companies who attempt to circumvent them.”

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 (including Michigan) and the District of Columbia intervened in the lawsuits.

Pfizer acquired Wyeth, Inc., in 2009, after the conduct alleged in the lawsuits. Wyeth distributed, marketed and/or sold pharmaceutical products in the United States, including Protonix Oral and intravenous Protonix IV. Protonix Oral and Protonix IV are in a class of drugs called Proton Pump Inhibitors 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 pay quarterly rebates to State Medicaid programs for each of its drugs sold to pharmacies that were reimbursed by Medicaid. The quarterly rebate was determined from each pharmaceutical manufacturer’s reported “Best Price,” or the lowest price for which it sold a covered drug in a particular quarter.

In this case, the governments alleged that during the third quarter 2001 through 2006, Wyeth sold Protonix Oral tablets and Protonix IV to hospitals at discounted prices. However, Wyeth did not treat the sales of these drugs 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 these drugs thereby causing the rebate amount 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.

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