Bayer To Pay $14M to Settle Inflated Medicaid Claims
Bayer Corp. agreed yesterday to pay $14 million to 45 states and the federal government to settle charges that the company engaged in wholesale price manipulation practices that caused hospitals and doctors to submit inflated reimbursement claims for prescription drugs used by Medicaid patients, the AP/Los Angeles Times reports. Touched off by a "whistle-blower" lawsuit filed under the False Claims Act by a Key West, Fla., company, the government's three-year investigation found that since the early 1990s, Bayer had reported inflated average wholesale drug prices, which are used as a benchmark by states to set Medicaid reimbursement rates. Bayer then allegedly sold these products at "dramatic discounts" to doctors, making their drugs more attractive than competing products. In addition, the federal government said the pharmaceutical company "knowingly" underpaid rebates it owed to state governments to compensate for discounts it had given to customers under Medicaid. The drugs in question were Kogenate, Koate-HP and Gamimmune, which are "widely" used to treat hemophilia and immune deficiencies.
According to Bayer attorney Paul Kalb, the company "did not admit liability" for these charges, but agreed to the settlement to end the investigation (AP/Los Angeles Times, 1/24). Bayer will pay $7.8 million to the federal government and $6.2 million to the states (Pear, New York Times, 1/24). All the "largest Medicaid states" were involved in the settlement, including California, New York, Texas, Michigan and Florida (AP/Los Angeles Times, 1/24). Among these, New York will receive the largest sum -- more than $1.3 million. Bayer also agreed to provide the government with data on its average selling prices, which reflect what the company actually charges most commercial customers. Medicaid officials said they could use this information to set more "appropriate" reimbursement rates. Finally, Bayer agreed to "cooperate" with law enforcement authorities in the investigations of similar pricing practices at 20 other pharmaceutical companies (New York Times, 1/24).
Kalb said the agreement will serve as a "model" for future settlements with the 20 other companies under investigation for similar charges (AP/Los Angeles Times, 1/24). "This is the first settlement on the whole question of the prices paid for drugs by federal health programs," Kalb said. "Bayer has tried to respond constructively," he added. New York Attorney General Eliot Spitzer added, "This settlement ... sends a strong message to other pharmaceutical manufacturers and health care providers that we will not allow them to enrich themselves at the expense of taxpayers and those most in need" (New York Times, 1/24). USA Today reports that wholesale price manipulation costs taxpayers more than $1 billion annually; the problem impacts both the Medicare and Medicaid programs, though the Bayer settlement just applies to prices charged under Medicaid. In return for Bayer's multimillion-dollar payment, the company is absolved of any liability. Tuesday's settlement was reached after "months" of negotiation with the Justice Department, HHS' Office of the Inspector General, the U.S. Attorney in Florida and state Medicaid fraud investigators (Appleby, USA Today, 1/24).