US and 16 States Sue Wyeth over Medicaid Discounts

In two whistleblower suits filed in May 2009, the United States and 16 states alleged that Wyeth (Madison, NJ) knowingly failed to offer the government the same discounts it gave to private purchasers of its drugs, as Medicaid laws require. The suits allege that Wyeth owes hundreds of millions of dollars in rebates to state Medicaid programs for its Protonix Oral and Protonix IV products.

The Medicaid Drug Rebate Program requires the manufacturers of branded pharmaceuticals to report the prices they charge their customers, including the “best price” offered for their drugs. Drugmakers must pay rebates calculated on discounted prices to the state Medicaid programs. The Medicaid Drug Rebate Program is intended to secure for Medicaid the same discounts that large commercial customers receive. Medicaid is one of the largest purchasers of drugs in the US and provides health insurance to the poor and the disabled.

Wyeth created a “Protonix Performance Agreement,” under which it gave hospitals large discounts for buying Protonix Oral and Protonix IV together. The company gave the discounts to thousands of hospitals between 2000 and 2006. Under the agreement, hospitals that placed both products on their formularies and met certain market-share requirements received a discount as high as 94% off the list price of Protonix Oral and as high as 80% off the list price of Protonix IV.

The lawsuits charge that Wyeth did not determine the effective prices that hospitals paid under this arrangement or offer the same prices to state Medicaid programs. By allegedly failing to meet these requirements, Wyeth avoided paying hundreds of millions of dollars to Medicaid in quarterly rebates, according to the suits.

“Our complaint charges that Wyeth created the Protonix bundle so they could increase their market share at the expense of the Medicaid program-a program to provide the least advantaged Americans with necessary medical care and services,” said Tony West, assistant attorney general for the Civil Division of the US Department of Justice, in a press release. “By offering massive discounts to hospitals, but then hiding that information from the Medicaid program, we believe Wyeth caused Medicaid programs throughout the country to pay much more for these drugs than they should have.”

The two separate civil False Claims Act suits were filed against Wyeth and are pending in the District of Massachusetts. California, Delaware, the District of Columbia, Florida, Illinois, Indiana, Louisiana, Massachusetts, New York, Michigan, Nevada, New Hampshire, Tennessee, Texas, Virginia, and Wisconsin joined the US in the whistleblower suits against Wyeth.

“The best price-reporting requirement is designed to assure that the nation’s healthcare programs for the poor-the Medicaid programs-are treated equally with drug companies’ best commercial customers,” said Michael K. Loucks, acting US attorney for the District of Massachusetts. “We seek through today’s suit to put the Medicaid programs on par with Wyeth’s best customers, as it had agreed.”

The two whistleblower lawsuits follow a Supreme Court ruling against Wyeth in a federal preemption case.