Pfizer and Endo Pay $50 Million in Whistleblower’s Medicaid Fraud Case

On December 27, 2012, Pfizer and Endo finalized settlements with the State
of Texas and the United States Government in a False Claims Act case that
alleged the two companies defrauded Medicare and Medicaid. According to the
Texas Attorney General’s press release, the two pharmaceutical manufacturers agreed to pay a combined total of$50 million to the State of Texas, the U.S., and whistleblower Ven-A-care.

The payments are to settle a False Claims Act lawsuit originally filed
by Ven-A-Care, the whistleblower, also known as a qui tam relator, on
behalf of the United States and Texas. According to the suit, Endo and
Pfizer submitted false statements to Medicare and Medicaid about the prices
the companies were charging for some generic drugs that they manufactured.
As a result, Medicare and Medicaid wound up paying more than they should
have for the drugs.

As a
whistleblower lawyer and a taxpayer, I was glad to see the government recovering some of the
money it lost to fraud. The shocking part is how often pharmaceutical
companies have been front and center in the False Claims Act area in recent years.

This particular fraud relates to how much Medicare and Medicaid have to
pay for the drugs that are prescribed to people who are on those plans.
If you are a Medicare or Medicaid beneficiary, then when you go to a drug
store to pick up a prescription, Medicare or Medicaid reimburses the drug
store/pharmacy for the cost of the medication, plus an amount on top of
that price. That extra amount on top of the cost of the drug is called
a “spread.” Usually Medicare and Medicaid agree to pay the
drug store chain a specific percentage or “scaled” payment
above what the drug store chain itself paid for the drug. In order to
do that accurately, of course, Medicare and Medicaid have to know how
much the pharmacy, wholesaler or distributor paid for the drug. To fill
in that missing piece of information, pharmaceutical companies are required
to report how much they charged.

If the pharmaceutical company lies about the amount, and says it was larger
than it really was, then Medicaid ends up reimbursing the drug store more
than it should have. For example, let’s say a drug manufacturer
charges a drug store chain $10 for a drug. If Medicaid thinks that the
drug store chain actually paid $20 for the drug, Medicaid’s calculated
payment to the drug store chain will be too high.

Don’t get me wrong – usually these cases are not quite as straightforward
as in that example. In fact, sometimes a pharmaceutical company will work
out a pretty convoluted way to hide the fact that it really charged the
drug store chain $10 for the drug. But the concept itself is easy to understand:
the pharmaceutical company says it is charging $x for a drug, when it
really is charging less than $x for the drug.

The Pfizer suit had initially been filed against three biotechnology companies,
ESI Lederle, Lederle Labs, and Pharmacia Corp. Pfizer then bought the
three companies.

The “relator” – meaning the party that revealed the fraud
to the United States and sued on behalf of the U.S. – was Ven-A-Care
of the Florida Keys, Inc. As the whistleblower, Ven-A-Care will get a
percentage of what the governments recovered.

Raymond Winter, who is the Chief of the Civil Medicaid Fraud Division in
Texas, signed the agreement on behalf of the Texas Attorney General. Dr.
Kyle Janek, M.D., signed on behalf of the Texas Health & Human Services
Commission.

As taxpayers, we owe Ven-A-Care a debt of gratitude for bringing this matter
to the attention of the governments, so that we could get back some of
the money that Medicare and Medicaid paid out solely because the drug
companies gave a falsely-inflated price for the drug. The Florida company
has been involved in exposing a number of schemes to defraud the federal
government and the state governments through Medicare and Medicaid fraud.