Attorney General Doug Peterson announced today that Nebraska reached an agreement in principle to settle allegations against Wyeth, a wholly owned subsidiary of Pfizer, Inc. The settlement will resolve allegations that Wyeth knowingly underpaid rebates owed under the Nebraska Medicaid Drug Rebate Program for the sales of Protonix Oral and Protonix IV between 2001 and 2006. Under the settlement Wyeth agreed to pay the state more than $1.48 million. This settlement is part of a larger, nationwide agreement where Wyeth and Pfizer will pay $784.6 million to the United States government and the States. Over $371 million of this amount will go to the states’ Medicaid Programs.
The settlement stems from two whistleblower lawsuits, U.S., al., ex rel. Kieff v. Wyeth Pharmaceuticals, Inc., Civ. No. 03-cv-12366, and U.S., et al., ex rel. William St. John LaCorte v. Wyeth, Civ. No. 06-cv-11724 which were filed in the United States District Court for the District of Massachusetts. The United States government, 35 states (including Nebraska) and the District of Columbia intervened in the lawsuits.
Wyeth, Inc. was a Delaware corporation with its headquarters in Madison, New Jersey. Pfizer, Inc. is a Delaware corporation headquartered in New York, New York. Pfizer acquired Wyeth, Inc., in 2009, after the conduct alleged in the lawsuits. Between 2001 and 2006, Wyeth distributed, marketed and/or sold pharmaceutical products in the United States, including Protonix Oral and intravenous Protonix IV. Protonix Oral and Protonix IV are in a class of drugs called proton pump inhibitors which inhibit the production of gastric acid.
The Medicaid Prescription Drug Rebate Program was enacted by Congress in 1990 as a cost containment measure for Medicaid’s payment for outpatient drugs. The program requires participating pharmaceutical manufacturers to pay quarterly rebates to state Medicaid programs for each of its drugs sold to pharmacies that were reimbursed by Medicaid. The quarterly rebate is determined from each pharmaceutical manufacturer’s reported “Best Price,” or the lowest price for which it sold a covered drug in a particular quarter.
In their court filings, the government plaintiffs, including Nebraska, alleged that during the third quarter of 2001 through 2006, Wyeth sold Protonix Oral tablets and Protonix IV to hospitals at discounted prices. The government plaintiffs alleged that Wyeth’s contracts with the hospitals created a bundled sale under the terms of the Medicaid Drug Rebate Agreement by linking discounts available to participating hospitals for Protonix IV to discounts on Protonix Oral tablets. However, Wyeth did not treat the sales of Protonix Oral tablets and Protonix IV as bundled within the meaning of the Medicaid Drug Rebate Program and thus failed to properly allocate the discounts available under the contract. As a result of this failure, Wyeth falsely reported its best prices for Protonix Oral tablets and Protonix IV. This caused Wyeth to understate the rebate amount for Protonix Oral tablets and Protonix IV that was owed to the federal government and the states.