Michigan settlement with pharmaceutical manufacturer Schering Plough

Aug 3 2004

Michigan Attorney General Mike Cox announced today a settlement with pharmaceutical manufacturer Schering Plough over its underpayment of Medicaid Drug Rebates on the antihistamine drug Claritin, netting more than $2.6 million for Michigan’s Medicaid program.

"Michigan’s Medicaid program exists to help provide affordable health care to those in need," Attorney General Cox said. "When companies engage in actions that keep prescription drug costs high, they do a disservice to Michigan and will be held accountable. This settlement today will help reimburse Medicaid and ensure that in the future, pharmaceutical companies fulfill their legal obligations to the State of Michigan."

The settlement, which includes 49 states and the District of Columbia, arises out of Schering’s alleged failure to provide Medicaid programs with the "best price" available for Claritin, as required by The Federal Medicaid Drug Rebate statute. Federal law mandates that pharmaceutical manufacturers file "best price" information with the Centers for Medicare and Medicaid Services (CMS), which then uses the information to calculate rebates for state Medicaid programs. Under the law, the manufacturer’s report to CMS must include all discounts, rebates, payments and other incentives related to the drug.

Schering allegedly provided two HMOs with discounts, concessions and incentives in order to keep Claritin on their formulary in lieu of a less expensive competitor product, which was not reported to CMS as required by law. The result was that the states received millions less in rebates from Schering than would have been paid had "best price" reporting been done appropriately.

Michigan’s settlement was reached in conjunction with a federal settlement negotiated by the United States Attorney’s Office in Philadelphia. Schering has agreed to plead guilty to a federal charge relating to the anti-kickback statute and will enter into a corporate integrity agreement to guide its future behavior.