PA to Receive $1.1 Million in Settlements with AstraZeneca, Cephalon

HARRISBURG, Pa. – Attorney General Kathleen G. Kane yesterday announced Pennsylvania has joined with other states and the federal government to settle allegations that AstraZeneca Pharmaceuticals, LP and Cephalon, Inc. overcharged the state Medicaid programs for drugs.

As part of the settlements, Pennsylvania will receive approximately $1.1 million in restitution and other recovery. The money will be directed to the state’s Department of Human Services, which administers the joint state/federal Medical Assistance program, also known as Medicaid.

AstraZeneca, a London and Delaware-based pharmaceutical manufacturer, has paid the states and the federal government a total of $46.5 million to resolve allegations against the company. Cephalon, a Pennsylvania-based subsidiary of Teva Pharmaceuticals Industries, Ltd., has paid the states and the federal government $7.5 million to settle similar allegations.
These settlements resolve allegations that AstraZeneca and Cephalon underpaid drug rebates owed to the states. Under a federal law known as the Medicaid Drug Rebate Program, drug manufacturers must periodically return a portion of the amount paid by state Medicaid programs for the manufacturers’ drugs.

The rebate program is designed to ensure that states pay competitive prices for drugs, and the rebates for a manufacturer’s drugs are calculated based on a percentage of the average prices drug wholesalers pay for each of the drugs. This average price, which the manufacturer reports to the federal government, is known as the Average Manufacturer’s Price, or “AMP.” The greater the AMP reported by the manufacturer, the greater the rebate the manufacturer must pay for that drug.

A whistleblower’s complaint alleged that AstraZeneca and Cephalon improperly treated certain fees paid to wholesalers as “discounts,” and that the effect of this accounting practice was to falsely decrease the AMP the companies reported to the federal government, improperly decreasing the rebates paid to the states.

The investigation resulted from a qui tam action filed in the United States District Court for the Eastern District of Pennsylvania under the federal False Claims Act and various state false claims statutes.

A National Association of Medicaid Fraud Control Units (NAMFCU) team participated in the investigation and conducted the settlement negotiations with AstraZeneca and Cephalon on behalf of the states. The team included representatives from the Offices of the Attorneys General for the states of Colorado, Massachusetts, Nevada, New York and South Carolina.

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