Schering-Ploug will return more than $9 million to the Texas Medicaid program for the company’s fraudulent reporting of prices for drug Claritin

Aug 2 2004

Texas Attorney General Greg Abbott has announced a settlement among Texas and other states with pharmaceutical giant Schering-Plough Inc. that will return more than $9 million to the Texas Medicaid program for the company’s fraudulent reporting of prices for the antihistamine drug Claritin.

The total payout to 49 states and the District of Columbia is $140.7 million.

“We will continue to aggressively recover money that rightfully belongs to the Texas Medicaid program from companies that attempt to defraud the system that was established to help the neediest of patients,” said Attorney General Abbott.

The settlement relates to Schering-Plough’s under-reporting to Medicaid of drug rebates given to HMOs from 1996-98. The federal rebate program requires drug makers that participate in the Medicaid program to give accurate information about its “best price” available for a product, in this case, Claritin.

The manufacturers report the best price, encompassing discounts or other incentives, to the Centers for Medicare and Medicaid Services, which uses this information to calculate rebates for the states’ Medicaid programs. In this case, Schering-Plough negotiated with HMOs to keep Claritin on a formulary list of drugs instead of a competitor’s product. However, the company did not notify the government of discounts it provided when it reported its best price.

As a result, Medicaid programs received millions less in rebates from the company than would have been paid had the best price amount been reported accurately.

Affecting the best price scheme was the company’s concessions to remain on the Medicaid formulary list. To accomplish this, the company paid a $2.5 million “data processing fee” to CIGNA for utilization reports this HMO was already obligated to provide Schering-Plough; the company’s prepayment of rebates, which were the equivalent of interest-free loans to both CIGNA and Pacificare; and Schering-Plough’s agreement to pay Pacificare’s antihistamine costs if those costs reached more than 25 percent over the previous year.

In addition to this settlement, the company entered a plead guilty plea with the U.S. Attorney’s Office in Philadelphia, PA, to federal anti-kickback charges, paying a fine of $52.5 million.