Teva hands over $135M to settle claims of inflated drug prices
- Teva Pharmaceuticals has paid the State of Illinois $135 million to settle a lawsuit alleging the company fraudulently inflated prescription drug prices, which in turn inflated Medicaid costs in the state.
- In 2005, current Illinois Attorney General Lisa Madigan filed a lawsuit against Teva subsidiaries and 46 other drugmakers, claiming the companies published inflated average wholesale prices (AWP). Medicaid uses these prices to determine reimbursement, so artificially higher reported AWP would in theory hike drug costs for the state.
- So far, Illinois has recovered more than $436 million through the suit. Teva has denied any liability with respect to the claims made by the state.
Teva agreed to settle this rather longstanding litigation in October last year. The Israeli pharma was given until January 2020 to pay the total settlement amount of $135 million, but apparently decided to get payment taken care of sooner rather than later.
According to regulatory filings, Teva's Watson subsidiary was ordered to pay compensatory damages of about $12 million in August 2013 in a separate case on the same issue brought by the State of Mississippi. An additional $18 million in punitive damages was added in March 2014.
Medicaid drug payments constitute a sizable cost for government healthcare budgets. Amid criticism of rising drug prices, lawmakers and officials across the U.S. have set their sights on potential abuse of the system by pharmaceutical companies.
In December, for example, a bipartisan bill was introduced in the Senate that aims to tackle misclassification of drugs within Medicaid. Entitled the Right Rebate Act of 2018, the bill would put in place financial penalties for drugmakers that knowingly misclassify their drugs.
Its introduction comes on the heels of scrutiny into Mylan's alleged misclassification of its EpiPen product as a generic drug, allowing the company to avoid paying higher levels of Medicaid rebates.
Under this new bill, which was introduced by Sens. Chuck Grassley, R-Iowa, and Ron Wyden, D-Ore., 25% of the penalty money would be earmarked for the improvement of drug data reporting and the oversight of drug classification information and compliance.
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