AstraZeneca, Teva to shell out $54M to settle Medicaid rebate underpayment claims
- AstraZeneca and Cephalon (owned by Teva) have agreed to pay the federal government and assorted states a total of $54 million to settle claims that the pharma companies underpaid rebates under the Medicaid Drug Rebate Program, thereby overcharging the U.S. and state governments for their drugs.
- Under the terms of the settlement, AZ will pay about $46.5 million ($26.7 million to the U.S. and the rest to affected states) while Teva/Cephalon will pay about $7.5 million ($4.3 million to the U.S. and the rest to affected states) to settle the claims.
- The proceedings against the companies were launched under the whistleblower provisions of the False Claims Act by a pharmacist, Ronald Streck.
At the crux of these allegations and the ensuing settlement are Average Manufacturer Prices (AMPs)—i.e., the prices that pharmaceutical companies report to government entities when assessing the costs of their products.
The government alleges that AZ and Teva/Cephalon deliberately underreported AMPs to public health programs. That may sound counterintuitive—after all, why would a company lower the price tag on its products on purpose?
But the reasoning here is that products with a higher AMP are actually required to provide deeper discounts, or rebates, to Medicaid. Conversely, a lower listed AMP results in a smaller rebate that must be paid by pharma companies down the line, effectively resulting in an over-charging of (or under-paying to) the government. The discounts received by Medicaid under the program are the tradeoff for the large government health program covering a company's drugs under its plans.
Medicaid/CHIP covers more than 71 million Americans and has grown significantly in recent years under the coverage expansions of the Affordable Care Act.