Schering-Plough Agrees To Pay $350 Million To Settle Medicaid Fraud Allegations
New Jersey-based Schering-Plough has agreed to pay $350 million in fines and plead guilty to criminal charges related to Medicaid fraud, according to individuals familiar with the case, the New York Times reports. The settlement, which the Schering-Plough likely will announce next week, resulted from a six-year investigation by the U.S. attorney's office in Philadelphia over allegations by three whistle-blowers that the company sold products to private health providers for "far less" than the company sold them to Medicaid, according to the Times. Under federal law, pharmaceutical companies must offer their lowest prices to Medicaid. An exception to the 1990 "best price" law allows pharmaceutical companies to sell their products to charitable organizations and clinics for a "nominal" price -- less than 10% of the average manufacturer price -- without the inclusion of that price in the calculation of the price charged to Medicaid.
As part of the settlement, officials for Schering-Plough likely will admit that the company awarded private hospitals and health insurers grants to conduct patient education and promotional programs to convince them to purchase company products at higher prices, according to individuals familiar with the case. Schering-Plough later billed Medicaid at the higher prices and excluded the grants, the Times reports. According to the Times, pharmaceutical companies in most cases do not challenge such charges because "the risks of a court battle are too great" and they could lose the right to sell their products to the federal government. Representatives for Schering-Plough and Patrick Meehan, the U.S. attorney in Philadelphia, declined to comment on the case (Harris, New York Times, 7/16).