Prescription Drug Manufacturers Underpaid Medicaid Rebates, Federal and State Whistleblower Complaint Alleges

PHILADELPHIA, Oct. 4, 2011 /PRNewswire-USNewswire/ -- According to a multi-count whistleblower action, alleging violations of federal and state False Claims Acts ("FCA"), more than a dozen top brand-name prescription drug manufacturers in the United States allegedly underpaid rebates to State Medicaid programs over the past seven years.  On October 3, 2011, the U.S. District Court for the Eastern District of Pennsylvania notified the parties that the whistleblower's Motion for Leave to File the Fourth Amended Complaint ("Complaint") was granted.  

The Complaint alleges that the defendant pharmaceutical manufacturers manipulated pricing data they report to the government and on which their rebate obligations on drugs they sell through State Medicaid programs are based.  The defendants, the Complaint alleges, understated their reported average manufacturer prices ("AMP"), on which their rebate obligations to the state Medicaid programs are calculated.  Improperly lowering AMP reduces rebates owed on high-priced pharmaceuticals, in turn, increasing the healthcare burden of the federal and state governments.

Beginning in 2004, the Complaint alleges, the defendant pharmaceutical manufacturers began entering into service fee agreements with drug wholesalers.  Drug manufacturers paid fees in exchange for certain services that the drug wholesalers provided.  With respect to the service fees they paid, the defendants improperly reduced the AMPs they reported to the government in one of two ways.  Several defendants treated the service fees they paid as discounts, improperly excluding them from and, in turn, lowering the AMPs they reported to the government.  Other defendants properly categorized the services fees as bona fide, excluding them from their AMP calculations.  Those defendants, however, offset certain price increases on their products against those service fees, failing to include those material price increases in their AMP calculations.  Under both scenarios, the Complaint alleges, by understating their reported AMPs, the defendants fraudulently underpaid rebates they owed to the States' Medicaid programs.  

The Complaint names as defendants various large drug manufacturers whose brand-name prescription drug sales represent a substantial segment of brand-name prescriptions dispensed in the U.S. through Medicaid programs.  The defendants include: Allergan, Inc., Amgen, Inc., AstraZeneca Pharmaceuticals LP, Biogen Idec, Inc., Bradley Pharmaceuticals, Inc. n/k/a Nycomed US, Inc., Cephalon, Inc., Eisai, Inc., Genzyme Corporation, Mallinckrodt, Inc., Novo Nordisk, Inc., Reliant Pharmaceuticals, Inc., Sepracor, n/k/a Sunovion Pharmaceuticals, Inc. and Upsher-Smith Laboratories, Inc.

The Relator is Ronald J. Streck, an attorney and pharmacist from Virginia who, for more than a decade, headed the National Healthcare Distribution Management Association.  The law firms of Berger & Montague, P.C., and Faruqi & Faruqi, LLP represent the Relator.  While the federal government and the states have declined to intervene in this action, the whistleblower's legal team will prosecute the case against the defendants.

Berger & Montague, P.C. is a nationally known Philadelphia law firm that has successfully represented whistleblowers for more than a decade, and Faruqi & Faruqi, LLP, of New York City and Jenkintown, Pennsylvania, a national law firm, concentrates its practice on complex civil and class action litigation.

The Berger & Montague team includes Daniel R. Miller, a former Delaware deputy attorney general and former past-president of the National Association of Medicaid Fraud Control Units.  Mr. Miller has tried more than 125 cases to jury verdict.

Miller stated that "the government relies on manufacturers accurately to self-report pricing data on the drugs they sell through the States' Medicaid programs.  In this case, the manufacturer defendants knowingly failed to provide the government with accurate pricing data.  Our team is committed to this litigation, and we are prepared to prosecute these claims to the fullest extent of the law."

According to Faruqi & Faruqi lead attorney Jacob Goldberg, "in addition to zealously advocating our client's claims on behalf of the cash-strapped federal and state governments, we intend to continue investigating the industry's reporting of pricing data to ensure full compliance with the law.  Now that this case is public, we encourage individuals with knowledge of this allegedly wrongful conduct to contact us."

Prosecuting this case along with Messrs. Miller and Goldberg are Todd Collins, Joy Clairmont, and Shauna Itri from Berger & Montague; and Nadeem Faruqi, Kendall Zylstra and Richard Schwartz from Faruqi & Faruqi.

The Relator filed his Complaint under seal on Oct. 28, 2008.  Under the FCAs, private citizens with knowledge of fraud may help the government recover ill-gotten gains and additional civil penalties.

Case Caption: U.S. ex rel. Streck v. Allergan, et al., C.A. No. 08-5135 (U.S.D.C. E.D. Pa.).

Berger & Montague, P.C.
With more than 60 attorneys in 10 specialized practice areas, Berger & Montague, P.C., has been nationally known for decades for its skilled handling of complex and class action litigation.  The Berger firm's award-winning attorneys have been involved in some of the biggest cases of their kind, and have helped secure more than $1 billion in whistleblower recoveries for federal and state governments under the False Claims Acts.  

Faruqi & Faruqi, LLC
Faruqi & Faruqi, LLP is a national law firm, representing investors, consumers and companies in the prosecution of claims under state corporate and consumer laws, the federal securities and antitrust laws, and federal and state wage and hour laws.  The firm focuses on providing exemplary legal services in complex litigation.  Founded in 1995, the firm maintains its principal office in New York City, with offices in Delaware, California, Florida and Pennsylvania.  Faruqi & Faruqi, LLP's 30 attorneys have demonstrated a clear commitment to championing the rights of shareholders, consumers and the public nationwide.

SOURCE Berger & Montague, P.C.