July 2, 2012—Drug manufacturer GlaxoSmithKline (GSK) has agreed to repay 340B covered entities a record-setting $20.2 million for overcharges covering the period 1994 through 2003 as part of a $3 billion global health care fraud settlement with the U.S. Justice Department (DOJ).
According to the July 2 settlement agreement, DOJ contends that the company used bundled sales contracts with hospitals, group purchasing organizations, and other customers to falsely claim that certain of its products were sold at “nominal cost,” defined as any price less than 10 percent of average manufacturer price (AMP) for purposes of calculating a drug’s Medicaid rebate percentage.[ms-protect-content id=”2799″] GSK excluded those transactions from its best price calculations. AMP and best price are, in turn, used to calculate 340B ceiling prices.
If GSK had correctly reported its prices, the government said, “the effective prices on the purportedly nominal-priced drugs in the bundled sales would, in some cases, have exceeded 10 percent of AMP and resulted in reportable best prices that were lower than the best prices GSK reported to CMS [the Centers for Medicare and Medicaid Services] for such drugs.”
“Further, those reallocations would have lowered the effective prices for certain other drugs included in the alleged bundled sales and would, in some cases, have resulted in reportable best prices for one or more of those drugs that were lower than the best prices GSK reported to [CMS] for those drugs,” the government continued.
As a result, the government contends, GSK knowingly overcharged 340B covered entities, underpaid Medicaid rebates to the states, and caused the federal government to be overcharged for its contributions to state Medicaid programs.
Under the settlement, GSK agreed to pay $20,235,000 to 340B covered entities. Under a process agreed to in a side letter to the settlement, “GSK will use its best efforts to identify affected [340B] entities and the amounts they were overcharged,” the settlement agreement states.
GSK also agreed to pay the federal government $160,972,069 and state Medicaid agencies $118,792,931.
The agreement states that “GSK expressly denies the allegations of the United States” in connection with its price-reporting obligations “and denies that it has engaged in any wrongful conduct.”
As part of the global settlement, GSK agreed to plead guilty to a three-count criminal information, including two counts of introducing misbranded drugs, Paxil and Wellbutrin, into interstate commerce and one count of failing to report safety data about the drug Avandia to the Food and Drug Administration (FDA), according to a DOJ news release.
In what is thought to be the previously largest 340B best price settlement, Schering-Plough agreed in 2004 to settle various claims including allegations that the drug company engaged in a kickback scheme in exchange for preferred treatment of Claritin and that it offered concessions to two HMOs in order to avoid lowering the drug’s best price. 340B covered entities received at least $10.6 million in that $345 million settlement.[/ms-protect-content]