Attorney General's News Release

April 25, 2006

Pharmaceutical company to pay $2.9 million to settle Medicaid provider fraud lawsuit filed by Nixon

Jefferson City, Mo. — A pharmaceutical company sued by Attorney General Jay Nixon will pay $2,932,000 to settle allegations it engaged in a pricing scheme that resulted in the Medicaid program paying too much for certain generic prescription drugs. Nixon filed the settlement with Dey Inc. today in St. Louis City Circuit Court.

"Obtaining $3 million to reimburse taxpayers shows we will continue to be aggressive with real action - not just words - in going after waste, fraud and abuse by providers against the Medicaid system," Nixon said.

Under the settlement terms, Dey will pay $2,732,000 to the Medicaid Fraud Reimbursement Fund and $200,000 to the Merchandising Practices Revolving Fund, which is used to fund consumer protection litigation and education.

Nixon's lawsuit, filed last May, said Dey did not accurately report the prices of drugs sold to pharmacies participating in the Medicaid program. The prices reported to pharmaceutical trade publications, referred to as the average wholesale price (AWP) or the wholesale acquisition cost (WAC), often were substantially higher than the prices paid by the providers for the drugs, which were primarily generic brand inhalants used by patients with respiratory conditions. The AWP and the WAC are two of the bases used by the Missouri Medicaid program to determine the reimbursement paid to the providers when they submit claims to Medicaid.

If a pharmacy knew it would receive a greater reimbursement from Medicaid if it dispensed a generic prescription drug sold by Dey, it would be more likely to dispense that drug, the lawsuit alleged. As a result, Nixon said, Dey was able to artificially increase its market share through a scheme that cost Missouri taxpayers.

Nixon's lawsuit also raised concerns that Dey hid the true costs of its drugs by giving providers free samples and by giving rebates and other inducements as a way of lowering the price providers paid. Those alleged inducements increased the spread between the AWP that Dey reported and the actual price paid by the providers.

Nixon had also sued a second company, Warrick Pharmaceutical Corp., at the same time he sued Dey, alleging Warrick engaged in the same scheme. That lawsuit is still pending. Last December, Nixon filed lawsuits against several other pharmaceutical companies, alleging they also manipulated the AWP to increase their market share and cost taxpayers more money. Those lawsuits are pending as well.

Inquiries from consumers should be directed to consumer@ago.mo.gov or 1-800-392-8222 (from within Missouri) or 573-751-3321 (outside Missouri).

All media inquiries should be directed to the Press Secretary.

E-mail      Phone: 573-751-8844         Fax: 573-751-5818