July 8, 2015—Pharmaceutical manufacturers AstraZeneca, Biogen Idec, and Cephalon have agreed to pay a combined $55.5 million to settle a whistleblower’s claims they defrauded the federal government and 24 states by underpaying Medicaid drug rebates.[ms-protect-content id=”2799″]
Under the agreements, AstraZeneca will pay $46.5 million, Cephalon (now owned by Teva Pharmaceutical) will pay $7.5 million, and Biogen Idec will pay $1.5 million. The whistleblower, Ronald Streck, the former executive director of the Healthcare Distribution Management Association, continues to pursue similar claims against the biotech company Genzyme. In July 2012, a federal district judge dismissed claims against nine other drug manufacturers in the case, U.S. ex rel. Streck v. Allergan. Streck’s lawyers say their client plans to appeal the judge’s dismissal of his claims against those nine once the Genzyme matter is concluded. Those companies are Allergan, Amgen, Bradley, Eisai, Mallinckrodt, Novo Nordisk, Reliant, Sepracor, and Upsher-Smith.
The Streck lawsuit accuses AstraZeneca, Biogen Idec, Cephalon, and Genzyme of underreporting? their average manufacturer prices for a number of their drugs for a decade or more by improperly treating millions of dollars in bona fide service fees paid to wholesalers as price reductions. As a result, the suit alleges that the companies underpaid Medicaid rebates to states and caused the federal government to be overcharged for its Medicaid payments to the states. The companies neither admit liability nor concede that the allegations have merit in the settlement agreement.
Streck does not claim that the manufacturers’ alleged misconduct caused 340B covered entities to overpay for drugs. A drug’s 340B ceiling price is based in part on its AMP and changes in AMP can affect the 340B price. Several past Medicaid rebate settlements between drugmakers and the federal government have included payments to 340B covered entities for overcharges.
Last month, the Department of Health and Human Services published a proposed regulation outlining the methodology for calculating 340B prices and clarifying when and how 340B overcharges occur. HHS’s Office of Pharmacy Affairs, meanwhile, is developing a system to calculate and verify 340B ceiling prices and enable entities to check them on a secure website. OPA has said in the past that it hopes to roll out the 340B pricing system later this year.
In another development with possible implications for 340B pricing, the U.S. House is scheduled to vote soon on the proposed 21st Century Cures Act. Language may be added that would forbid manufacturers of brand-name drugs from including sales of authorized generics in their AMP calculations. This policy would have the effect of increasing the AMP of brand-name drugs with authorized generics.[/ms-protect-content]