COLUMBUS — Attorney General Mike DeWine said Wednesday that Ohio has joined with other states and the federal government to settle allegations that AstraZeneca Pharmaceuticals LP and Cephalon Inc. overcharged the state Medicaid health care programs for drugs.
Medicaid is jointly funded by the federal and state governments. The AstraZeneca settlement for Ohio is $1.24 million, with $415,000 as the state’s share. The Cephalon settlement for Ohio is $280,000, with $93,500 as the state’s share.
“This settlement will help ensure that the Medicaid program gets the best value for the drugs that it pays for,” DeWine said.
AstraZeneca, a London and Delaware-based pharmaceutical manufacturer, has paid the states and the federal government $46.5 million to resolve allegations against the company. Cephalon, a Pennsylvania-based subsidiary of Teva Pharmaceuticals Industries Ltd., has paid the states and the federal government $7.5 million to settle similar allegations.
These settlements resolve allegations that AstraZeneca and Cephalon underpaid drug rebates owed to the states. Under a federal law known as the Medicaid Drug Rebate Program, drug manufacturers must periodically return a portion of the amount paid by state Medicaid programs for the manufacturers’ drugs.
The rebate program is designed to ensure that states pay competitive prices for drugs, and the rebates for a manufacturer’s drugs are calculated based on a percentage of the average prices drug wholesalers pay for each of the drugs. This average price, which the manufacturer reports to the federal government, is known as the Average Manufacturer’s Price. The greater the AMP reported by the manufacturer, the greater the rebate the manufacturer must pay for that drug.
A whistleblower’s complaint alleged that AstraZeneca and Cephalon improperly treated certain fees paid to wholesalers as “discounts,” and that the effect of this accounting practice was to falsely decrease the AMP the companies reported to the federal government, improperly decreasing the rebates paid to the states.