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Mass. AG Martha Coakley?s Office Files Complaint Against Drug Manufacturer Wyeth

BOSTON, June 22, 2009  Massachusetts Attorney General Martha Coakley’s Office joined a coalition of states that included California, Delaware,  Florida, Hawaii, Illinois, Indiana, Louisiana, Michigan, Nevada, New York, Tennessee, Texas, Virginia, Wisconsin and the District of Columbia, in filing a complaint against the drug manufacturer Wyeth. The complaint, filed in U.S. District Court in Massachusetts, alleges the company knowingly failed to give the government the same discounts it provided to private purchasers of its drugs, as required by laws governing the Medicaid program.  As a result, Wyeth allegedly avoided paying hundreds of millions in rebates due to state Medicaid programs for its drugs, Protonix Oral and Protonix IV.  These drugs belong to a class of drugs known as proton pump inhibitors (PPI), which are used to suppress stomach acid. 

“The Medicaid Program requires pharmaceutical companies to provide the same discounts and rebates to the state Medicaid program as they do to their large commercial customers,” Attorney General Martha Coakley said.  “Our office will continue to work in collaboration with our partners in state and federal law enforcement to identify and eliminate fraudulent pricing schemes that compromise the integrity of this important publically funded health care program.” 

The complaint filed by the states, alleges that between 2000 and 2006, Wyeth offered steep discounts to thousands of hospitals nationwide for Protonix Oral and Protonix IV under a pricing arrangement known as the “Protonix Performance Agreement.”  This pricing arrangement required the hospitals to purchase both drugs together under a so-called “bundled” arrangement and it offered them a steep discount for doing so. The complaint alleges that Wyeth did this in part to gain access to the far more lucrative retail outpatient market, intending that patients who used the intravenous version of Protonix in the hospital would later purchase Protonix Oral once they were discharged from the hospital.  According the complaint, under the Protonix Performance Agreement, hospitals that placed both products on their formularies and attained certain market share requirements were entitled to up to a 94% discount off the list price of Protonix Oral and up to 80% off the list price of Protonix IV.  Although Wyeth was required under the Medicaid Drug Rebate Program to determine the effective prices of the bundled drugs paid by hospitals under this arrangement, and to pass along the benefit of the lower prices to the state Medicaid programs, Wyeth allegedly failed to do so and therefore avoided paying hundreds of millions of dollars to Medicaid in quarterly rebates.

This action by the states follows the filing of a similar complaint on May 18, 2009, by the United States in whistleblower lawsuits pending in the United States District Court for the District of Massachusetts against Wyeth.  Under the Medicaid Drug Rebate Program, drug manufacturers of brand name drugs (i.e. non-generic drugs) are required to report to the government the prices they charge their customers, including the “best price” offered for their drugs.  They also are required to pay rebates to the state Medicaid programs that are calculated based on any discounted prices that are offered to other customers.  Congress created the Medicaid Drug Rebate Program in order to ensure that Medicaid, one of the largest purchasers of drugs in the United States and the nation’s provider of health insurance to the poor and the disabled, receives the benefit of the same discounts offered to large commercial customers in the marketplace.

The case is being handled for Massachusetts by Assistant Attorney General Ann Ackil, of Attorney General Coakley’s Medicaid Fraud Division. Attorney General Coakley’s office worked on the investigation with the Civil Division of the U.S. Department of Justice, the U.S. Attorney’s Office for the District of Massachusetts, and the Offices of Inspector General of the Department of Health and Human Services. 


Jill Butterworth
(617) 727-2543

Posted: June 2009