Attorney General Ben Chandler today announced that Kentucky’s Medicaid program will recoup nearly $10 million dollars from a settlement with two major drug manufacturers—GlaxoSmithKline and Bayer Corporation—for violating the federal Medicaid drug rebate law.
The settlement, involving 48 states and the District of Columbia, yielded nearly $330 million dollars total, and is the largest Medicaid fraud case in history. Medicaid is the federal/state health care insurance program that provides health care coverage for the indigent. Kentucky’s Medicaid program, financed with 75% federal and 25% state tax dollars, costs about 3 billion dollars a year.
“Enforcing laws that protect the Medicaid program has and continues to be a priority for my office. This historic agreement is a major accomplishment in that effort, and I am pleased we could recoup these funds at a time when Medicaid is in such desperate need,” said Ben Chandler.
Chandler said the investigation of Bayer and GlaxoSmithKline was initiated after a whistleblower complaint was filed against Bayer in February, 2000. The investigation later expanded to GlaxoSmithKline, and revealed that the drug companies sold several heavily prescribed medications, including Paxil, Flonase, and Cipro to several large Health Maintenance Organizations at deeply discounted prices, repackaging the drugs under the HMO’s private label.
The companies then failed to report these discounted sales to the federal government under the Medicaid Rebate law, which calls for pharmaceutical companies to disclose the “best” or lowest price they sell a product to any commercial buyer. The government uses these figures to calculate rebates owed to state Medicaid programs—to insure that the states are paying as low a price for drugs as commercial buyers like HMOs.
Because Bayer and GlaxoSmithKline did not report the deep discounts they gave to large HMO companies, state Medicaid programs paid millions of dollars more for the affected drugs over a 3 to 5 year period, because they did not receive the amount of rebates they should have gotten from the companies.