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KV Pharmaceutical to Pay $17 Million to Settle National False Claims Allegations

Attorney General Peter F. Kilmartin announced today that Rhode Island has joined other states and the federal government and reached an agreement in principle with KV Pharmaceutical Company to settle allegations that the company failed to advise the Centers for Medicare and Medicaid Services (CMS) that two unapproved products did not qualify for coverage under federal and state health care programs.

KV Pharmaceutical Company, which was the St. Louis-based parent company of now-defunct Ethex Corporation, will pay the states and the federal government a total of $17 million dollars to compensate Medicaid and various federal healthcare programs for its conduct. Ethex is alleged to have submitted false quarterly reports to the government related to a pair of drugs, Nitroglycerin Extended Release Capsules (Nitroglycerin ER) and Hyoscyamine Sulfate Extended Release Capsules (Hyoscyamine ER).

The federal share of the settlement is $10,158,695, and the state Medicaid share of the settlement is $6,841,305. The lawsuit was brought under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private parties with knowledge of fraud to sue on behalf of the United States and share in any recovery.

Under the settlement, the total Rhode Island federal/state amount is $74,964.81 with $43,330.56 being paid to the state for its portion of the state Medicaid settlement. The monies will be paid in installments through 9/15/2016.

"With Medicaid budgets comprising one of the largest portions of our state budget, and only increasing, it is critical to monitor pharmaceutical companies to ensure taxpayer dollars are being spent properly. This settlement is an example of the Office of Attorney General working with our state and federal partners to uncover Medicaid fraud and abuse and make the system more accountable and efficient," said Attorney General Kilmartin.

Nitroglycerin ER is a single entity coronary vasodilator containing controlled release nitroglycerin that was used for treating angina pectoris (chest pain due to lack of oxygen supply to the heart muscle). Hyoscyamine Sulfate ER is an antispasmodic medication that has been used to treat various stomach, intestinal and urinary tract disorders that involve cramps, colic or other painful muscle contractions. While the active ingredients in Nitroglycerin and Hyoscyamine Sulfate ER had been in products on the market for many years, the Food and Drug Administration (FDA) made determinations in the late 1990s that resulted in the drugs being ineligible for reimbursement by government health care programs such as Medicaid.

The settlement resolves allegations that Ethex misrepresented the regulatory status of both drugs and failed to advise CMS that these unapproved drugs did not qualify for coverage under federal health care programs. As a result, the government contends, Ethex knowingly caused false claims to be submitted for Nitroglycerin ER and Hyoscyamine Sulfate ER. Ultimately, neither drug ever received full regulatory approval for safety and effectiveness, and neither product is currently on the market.

A National Association of Medicaid Fraud Control Units team participated in the investigation and conducted the settlement negotiations with KV on behalf of the settling states.

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