Wyeth and Pfizer Agree to Pay $784.6 Million to Resolve Lawsuit Alleging that Wyeth Underpaid Drug Rebates to Medicaid

BOSTON -- United States Attorney Carmen M. Ortiz announced today that drug companies Wyeth and Pfizer, Inc., have agreed to pay $784.6 million to resolve allegations that Wyeth failed to give the government the same discounts it provided to private purchasers of its drugs, as required by the Medicaid program.

"This significant settlement illustrates that the government will not permit drug companies to dodge their obligations to the Medicaid program or create elaborate pricing schemes to deceive Medicaid into paying more than it should for drugs," said U.S. Attorney Ortiz. "This settlement, after years of hard-fought litigation, shows our commitment to ensuring that healthcare businesses do not take advantage of the federal health insurance programs which serve those who need assistance most."

"This settlement demonstrates our unwavering commitment to hold pharmaceutical companies responsible for pursuing pricing schemes that attempt to manipulate and overcharge federal health care programs -- programs that protect the poor and disabled -- for drugs sold to commercial customers at much lower prices," said Principal Deputy Attorney General Benjamin Mizer, head of the Civil Division for the Department of Justice.

"When we make agreements with others we expect follow-through," said Phillip Coyne, Special Agent in Charge with the Office of Inspector General of the U.S. Department of Health and Human Services. "Similarly, taxpayers rightly expect large pharmaceutical companies will not falsely report prices to boost profits. Any drug company shirking those responsibilities can expect to be held accountable for its deception."

According to the government's complaint, Wyeth gave thousands of hospitals deep discounts on two of its proton pump inhibitor (PPI) drugs, Protonix Oral and Protonix IV, but failed to report those discounts to Medicaid. The government alleged that Wyeth "bundled" discounts on Protonix Oral with discounts on Protonix IV in order to induce hospitals to use Protonix Oral, which hospitals otherwise would have had little incentive to use because other pre-existing oral PPI drugs were priced competitively and were considered to be at least as effective and safe. Wyeth wanted to control the hospital market because patients discharged from the hospital on Protonix Oral were likely to stay on the drug for long periods of time, during which payers, including Medicaid, would pay nearly full price for the drug.

Under the Medicaid program, which is the nation's provider of health insurance to the poor and disabled, drug companies must report to the government the best prices they offer other customers for their brand name drugs. Based on these reported best prices, the drug companies pay rebates to the state Medicaid programs so that Medicaid receives the same discounts that drug companies offer to other large customers in the marketplace.

The government alleged that Wyeth hid from Medicaid the bundled discounts it gave to hospitals on Protonix Oral and Protonix IV. As a result, Wyeth wrongfully avoided paying hundreds of millions of dollars in rebates to Medicaid from 2001 to 2006.

Under the terms of today's settlement, Wyeth will pay $413,248,820 to the federal government and $371,351,180 to state Medicaid programs. The settlement resolves allegations filed by two whistleblowers, Lauren Kieff and William St. John LaCorte. See United States ex rel. Kieff and LaCorte v. Wyeth and Pfizer, Inc., Nos. 03-12366 and 06-11724-DPW (D. Mass.). The False Claims Act permits private parties to sue on behalf of the government for false claims for government funds and to receive a share of any recovery. Under the terms of the settlement agreement, the federal and state governments will pay a combined relator share of $98,058,190.

As part of the settlement, Wyeth and Pfizer do not deny the government's allegations. Pfizer, which is headquartered in New York City, acquired Wyeth in 2009. The conduct at issue occurred prior to the acquisition.

This settlement is part of the government's ongoing initiative to combat health care fraud, and specifically to reduce and prevent Medicare and Medicaid fraud. One of the most powerful tools in this effort is the False Claims Act. Since the beginning of the 2016 fiscal year, the District of Massachusetts has recovered over $1 billion in health care fraud settlements on behalf of American taxpayers, and simultaneously has secured the payment of over $150 million to whistleblowers who initiated these matters. For more information, see Warner Chilcott http://www.justice.gov/usao-ma/pr/warner-chilcott-sentenced-pay-125-million-health-care-fraud-scheme, Millennium Health http://www.justice.gov/usao-ma/pr/millennium-laboratories-pay-256-million-resolve-false-billing-and-kickback-claims, RehabCare http://www.justice.gov/usao-ma/pr/united-states-recovers-over-133-million-fraudulent-nursing-home-therapy-claims, Coloplast Corp http://www.justice.gov/usao-ma/pr/coloplast-corp-and-liberator-medical-agree-pay-36-million-resolve-kickback-allegations., and Boston Medical Center http://www.justice.gov/usao-ma/pr/boston-medical-center-agrees-pay-11-million-resolve-allegations-it-improperly-billed.

This matter was investigated by the U.S. Department of Health and Human Services, Office of the Inspector General and the Federal Bureau of Investigation. It was handled by Assistant U.S. Attorneys Gregg Shapiro, Brian Perez-Daple, and Kriss Basil of Ortiz's Office and Justice Department Trial Attorneys Sanjay Bhambhani, Andy Mao, Zoila Hinson, and Christopher Terranova of the Civil Division's Commercial Litigation Branch.