Dava Pharmaceuticals Inc. has agreed to pay the United States $11 million to settle allegations that it violated the False Claims Act by misreporting drug prices in order to reduce its Medicaid Drug Rebate obligations, the Justice Department announced today.
The settlement resolves allegations that between Oct. 1, 2005 and Sept. 30, 2009, Dava and its corporate predecessors knowingly underpaid their rebate obligations under the Medicaid Prescription Drug Rebate Program. Under that program, participating drug companies are required to pay quarterly rebates to state Medicaid programs based, in part, on whether a drug is a “generic” or “branded” product and the difference between what the health care program paid for the drug and prices paid by other purchasers.
In order to reduce its Medicaid rebate obligation, Dava incorrectly treated its version of the drugs cefdinir, clarithromycin and methotrexate as “generic” drugs rather than “branded” products, thereby lowering the overall percentage rebate payable to Medicaid. In addition, Dava further reduced its Medicaid rebate obligations by incorrectly calculating average manufacturer prices for its versions of the drugs cefdinir, clarithromycin, methotrexate and rheumatrex. As a result, Dava underpaid drug rebates to the Medicaid program and overcharged certain public health service entities for these products.
“Pharmaceutical companies that participate in Medicaid must accurately report drug prices and pay their fair share of rebates to the federal and statement governments,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “Settlements like this one help maintain important programs on which so many depend for needed health care.”
The federal government’s portion of the settlement is approximately $5.7 million. Dava will also pay over $5 million to the Medicaid participating states and approximately $200,000 to certain public health services entities who paid inflated prices for the drugs at issue.
The settlement resolves a lawsuit filed in federal court in the District of Maryland under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens to bring civil actions on behalf of the United States and share in any recovery. As part of today’s resolution, the whistleblower – Jim Conrad – will receive 15 percent of the settlement proceeds.
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