Monday, December 28, 2009

California To Receive $21.3 Million In Qui Tam Settlement Regarding Pharmacy Reimbursement For Albuterol And Other Drugs

There was a recent qui tam settlement by the State of California. On December 17, 2009, the California Attorney General's Office announced a $21.3 million settlement with Schering-Plough Corporation, resolving allegations the company "deliberately inflated" the price of Albuterol and other drugs, causing California's Medicaid (Medi-Cal) program to overpay millions of dollars in pharmacy reimbursement.

Albuterol is a widely prescribed generic drug, delivered through inhalers, nebulizers and masks, and used to treat asthma and other breathing problems.

The settlement stems from a lawsuit filed by a whistleblower against several pharmaceutical companies accused of Medicaid fraud. The case is still proceeding against Dey, Inc., Mylan Pharmaceuticals, Inc., Sandoz, Inc. and their parent companies. Schering-Plough recently merged with Merck, and is now known as Merck & Co.

California's $21.3 million agreement is one of three settlements negotiated with Schering-Plough, collectively totaling $69 million, over falsely inflated drug prices. The three lawsuits were originally filed by a whistleblower, Ven-A-Care of the Florida Keys, Inc., on behalf of California, Florida and the federal government. Schering-Plough also reached settlements with Florida and the federal government, the latter for approximately $44.5 million.

The settlement resolves allegations that Warrick Pharmaceuticals, a subsidiary of Schering-Plough, deliberately inflated the Average Wholesale Prices (AWPs) it reported to California for Albuterol. Medi-Cal sets the reimbursement rates for pharmacies for many of the drugs dispensed to Medi-Cal patients based on the AWPs reported by drug manufacturers.

California pharmacies dispensed Albuterol to patients and were then reimbursed by Medi-Cal. By reporting falsely inflated AWPs, some drug manufacturers caused Medi-Cal to overpay millions of dollars in pharmacy reimbursement. Medi-Cal is funded on a roughly 50% - 50% basis by the federal government and the State of California.

Reporting fraudulent AWPs is a violation of the California False Claims Act. Ven-A-Care filed a lawsuit under seal in Superior Court, then it was removed to the U.S. District Court for the Central District of California and finally transferred to U.S. District Court of Massachusetts. The Attorney General's Office investigated the claims, and in 2005, intervened in the lawsuit with its own complaint, currently being litigated in federal court in Boston.

The California Department of Health Care Services, which is responsible for administering Medi-Cal, will receive $20.1 million, and the Attorney General's False Claims Fund will receive just over $1.2 million.

A copy of the settlement agreement can be found at

Posted by Tracy Green. Should you have any questions regarding your own situation or this post, you can email Tracy at Green & Associates in Los Angeles, California focuses their practice on the representation of licensed professionals, individuals and businesses in civil, business, administrative and criminal proceedings. They have a specialty in representing licensed health care providers. Their website is:


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