Posted on: Wednesday, May 14, 2003

State to get $1.7 million in fraud settlements

By Curtis Lum
Advertiser Staff Writer

The state will receive about $1.7 million as part of the largest federal Medicaid fraud settlement involving pharmaceutical manufacturers.

Forty-nine states and the District of Columbia are involved in the multimillion-dollar settlements against Bayer Corp. and GlaxoSmithKline. The two companies admitted taking part in a "lick and stick" scheme in which they failed to accurately report their "best price" to the Centers for Medicare and Medicaid Services.

Bayer has agreed to pay $242 million in damages and penalties to federal and state governments, of which $1.6 million will go to Hawai'i, said state Attorney General Mark Bennett. The federal government also will recommend that Bayer pay a $5.59 million fine.

GlaxoSmithKline will pay $87.6 million in civil settlements, of which Hawai'i will receive $126,261. The settlements were announced last month.

Both companies were accused of failing to pay sufficient rebates to state Medicaid programs. Under federal Medicaid laws, pharmaceutical manufacturers must provide "best price" information to the Centers for Medicare and Medicaid Services to be eligible for Medicaid payment. The "best price" is used to calculate rebates payable to the state Medicaid programs.

But Bennett said the companies relabeled or repackaged drugs at deeply discounted prices and sold them to HMOs.

Those prices were significantly lower than those charged to the Medicaid programs. Bennett said the "lick and stick" scheme was a way for the two pharmaceutical companies to avoid their obligation to pay additional rebates to the Medicaid programs.

Bennett said Bayer failed to report the "best price" for the drugs Cipro, an antibiotic, and Adalat CC, an antihypertensive drug. GlaxoSmithKline did not report its best price for Flonase, a nasal spray, and Paxil, an antidepressant.