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McKesson False Claims Medicaid settlement bill: $190 million

HCPRO Website, April 26, 2012

Inflated price reporting on prescription drugs that led to higher payment rates for pharmaceuticals under Medicaid cost McKesson Corporation $190 million in a settlement reached with the U.S. Department of Justice (DOJ), government officials announced Thursday, April 26.

McKesson agreed to pay the United States more than $190 million to resolve claims that it violated the False Claims Act by causing Medicaid to overpay for those drugs.

McKesson reported the inflated pricing data to First DataBank (FDB), a publisher of drug prices that are used by most state Medicaid programs to set payment rates for pharmaceuticals, according to a DOJ press release.

In addition to the $190 million – which represents the $187 million settlement and interest – state governments can separately negotiate with McKesson to resolve claims based on the states’ shares of the Medicaid overpayments.

The drug pricing data at issue here relates to the “Average Wholesale Price” (AWP) benchmark used by Medicaid and other programs to set payment rates for pharmaceuticals. McKesson reported inflated mark-up percentages to FDB for a wide variety of brand name drugs, causing FDB to publish inflated AWPs for those drugs.

“This case demonstrates the Department of Justice’s commitment to ensuring that Medicaid funds are expended appropriately,” said Stuart F. Delery, acting assistant attorney general. “Companies that report pricing data that affect government payment rates, whether those companies are manufacturers, wholesalers, or otherwise, are required to report that data accurately.”

Daniel R. Levinson, inspector general for HHS, said the settlement highlights the inspector general’s commitment to protecting against artificially inflated drug prices.

"Our analyses of drug price reporting practices – including the use of ‘Average Wholesale Price’ – have consistently identified excessive Medicare and Medicaid payments resulting from these practices,” he added.

In a statement released to HCPro, Inc. by McKesson's media relations team, officials there said, "We continue to believe that the AWP claims against McKesson are without merit. McKesson adhered to all applicable laws and regulations, and we do not set AWPs. We did not manipulate drug prices, and did not violate any laws. However, when we weighed our conviction that we did not violate any laws against the inherent uncertainty of litigation, we determined that this settlement was in the best interest of our employees, customers, suppliers and shareholders."