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Sean D. Reyes
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Utah Attorney General Recovers $680,000 From Lawsuit with Wyeth and Pfizer

Resolves Allegations of Underpaying Rebates Owed Under the Medicaid Drug Rebate Program

SALT LAKE CITY April 28, 2016 – The Office of the Attorney General (OAG) announced today that Utah reached an agreement in principle to settle allegations against Wyeth, a wholly owned subsidiary of Pfizer, Inc.  The settlement will resolve allegations that Wyeth knowingly underpaid rebates owed under the Medicaid Drug Rebate Program for the sales of Protonix Oral and Protonix IV between 2001 and 2006.  Under the settlement Wyeth agreed to pay $784.6 million to the United States and the individual states.  Over $371 million of this amount will go to the Medicaid Program.   Utah will receive $680,000 under the settlement.

“Pharmaceutical regulations are often complex, but this successful conclusion is a great win and reflects the hard work Director Steed and his team put into these cases,” said Attorney General Sean Reyes. “We are very proactive in responding to violations committed by large pharmaceutical companies. We value honest industry practices but hold a hard line against fraud.”

“We have been engaged in pretrial litigation against Wyeth for several years over this matter,” said Robert Steed, Director of the Utah Medicaid Fraud Control Unit.  “I am proud of the work of our attorneys in helping to bring about this result.” Assistant Attorneys General Robert Morton and Kaye Lynn Wootton represented Utah in the litigation.

The settlement stems from two whistle-blower lawsuits, U.S., al., ex rel. Kieff v. Wyeth Pharmaceuticals, Inc., Civ. No. 03-cv-12366, and  U.S., , et al., ex rel. William St. John LaCorte v. Wyeth, Civ. No. 06-cv-11724  which were filed in the United States District Court for the District of Massachusetts.  The United States, 35 states and the District of Columbia intervened in the lawsuits.

Wyeth, Inc. was a Delaware corporation with its headquarters in Madison, New Jersey.    Pfizer, Inc. is a Delaware corporation headquartered in New York, New York.  Pfizer acquired Wyeth, Inc., in 2009, after the conduct alleged in the lawsuits.  At all relevant times, Wyeth distributed, marketed and/or sold pharmaceutical products in the United States, including Protonix Oral and intravenous Protonix IV.  Protonix Oral and Protonix IV are in a class of drugs called Proton Pump Inhibitors which inhibit the production of gastric acid.

The Medicaid Prescription Drug Rebate Program was enacted by Congress in 1990 as a cost containment measure for Medicaid’s payment for outpatient drugs.  The Medicaid Drug Rebate Program requires participating pharmaceutical manufacturers to pay quarterly rebates to State Medicaid programs for each of its drugs sold to pharmacies that were reimbursed by Medicaid.  The quarterly rebate was determined from each pharmaceutical manufacturer’s reported “Best Price,” or the lowest price for which it sold a covered drug in a particular quarter.

In their court filings, the government plaintiffs alleged that during the third quarter 2001 through 2006, Wyeth sold Protonix Oral tablets and Protonix IV to hospitals at discounted prices. The governments alleged that Wyeth’s contracts with the hospitals created a bundled sale under the terms of the Medicaid Drug Rebate Agreement by linking discounts available to participating hospitals for Protonix IV to discounts on Protonix Oral tablets.   However, Wyeth did not treat the sales of Protonix Oral tablets and Protonix IV as bundled within the meaning of the Medicaid Drug Rebate Program and therefore failed to properly allocate the discounts available under the contract.   As a result of this failure, Wyeth falsely reported its Best Prices for Protonix Oral tablets and Protonix IV thereby causing the Unit Rebate Amount for Protonix Oral tablets and Protonix IV, which is used to determine the quarterly rebate to pay the State for each drug, to be understated during the Relevant Period.  The governments alleged that Wyeth concealed, avoided or decreased its obligation to pay Medicaid Drug Rebates to the State for Protonix Oral tablets and Protonix IV.

Because the Medicaid program is jointly funded by the federal and State governments, Pfizer will pay in excess of $413 million of the $784.6 million to the United States.

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