A.G. Schneiderman Announces $54 Million Multistate Settlement With Astrazeneca LP And Cephalon, Inc. to Resolve Allegations of Overcharging Medicaid for Drugs

NY’s Medicaid Program To Receive Nearly $7.5 Million In Restitution From Astrazeneca LP And Nearly $1 Million From Cephalon, Inc. 

Schneiderman: My Office Will Fight To Root Out Fraud And Safeguard Medicaid

NEW YORK – Attorney General Eric T. Schneiderman today announced that New York has joined with all other states and the federal government to settle allegations with AstraZeneca LP and 48 other states, District of Columbia and the federal government  with Cephalon that the companies overcharged state Medicaid programs for their pharmaceutical products.  AstraZeneca, a Delaware limited partnership with its principal place of business in Delaware, and Cephalon, Inc. a Pennsylvania-based subsidiary of Teva Pharmaceutical Industries. Ltd., will pay the states and the federal government $54 million, of which Astra Zeneca LP will pay $46.5 million and Cephalon, $7.5 million.  $7,493,604.39 will go to the New York State Medicaid Program based on the Astra Zeneca agreement and $996,110.12 will go to the New York State Medicaid Program based on the Cephalon, Inc. agreement.

“Many New Yorkers rely on Medicaid for essential health care services, and when companies overcharge Medicaid, it harms taxpayers and patients alike,” said Attorney General Schneiderman. “My office will continue working to root out Medicaid fraud and safeguard this critical program.”

Specifically, this settlement resolves allegations that AstraZeneca and Cephalon under-paid drug rebates owed to the states. Under the 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 is calculated based on a percentage of the average price drug wholesalers pay for the manufacturers’ drugs.  This average price, which the manufacturer reports to the federal government, is known as the Average Manufacturer’s Price or “AMP”.  The greater the AMP reported by the manufacturer, the greater the rebate the manufacturer must pay.

The complaint alleged that AstraZeneca and Cephalon falsely treated certain fees paid to wholesalers as “discounts”.  The effect of this accounting practice was to falsely decrease the AMP AstraZeneca and Cephalon reported to the federal government, and therefore falsely decreasing the rebates paid to the states, including New York.

The investigation resulted from a qui tam action filed in the United States District Court for the Eastern District of Pennsylvania under both the Federal False Claims Act, New York False Claims Act and other state false claims statutes.  As part of the settlement the State of New York will receive $7,493,604.39 from AstraZeneca and $996,110.12 from Cephalon.  The Attorney General would like to thank whistleblower Ronald Streck for bringing this matter forward. 

Senior Special Auditor Investigator Matthew Tandle and Special Auditor Investigator Colin Ware were on the national team, which was led by the Commonwealth of Massachusetts.  Stacey Millis is the Chief Auditor of the Medicaid Fraud Control Unit’s Civil Enforcement Division.  The matter in New York was handled by Jay Speers, Counsel to the New York MFCU.  The New York Medicaid Fraud Control Unit is led by Acting Director Amy Held and Assistant Deputy Attorney General Paul Mahoney.  The Criminal Justice Division is led by Kelly Donovan.

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