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RI's Medicaid Program to Receive More Than $5 Million Under Settlement with Wyeth and Pfizer

Wyeth and Pfizer Agree to Pay $784.6 Million to Resolve Allegations of Underpaying Rebates Owed Under the Medicaid Drug Rebate Program

Attorney General Peter F. Kilmartin announced today that Rhode Island will share in a $784.6 million dollar settlement reached with Wyeth, a wholly owned subsidiary of Pfizer, Inc., to 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 and Pfizer agreed to pay $784.6 million to the United States and the States. More than $371 million of the settlement will go to states' Medicaid Programs, of which $5,463,754 will go to Rhode Island's Medicaid Program.

The settlement stems from two whistleblower 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.

"As the State continues to look for ways to contain increasing Medicaid costs while maintaining the same level of quality services to the populations it serves, this settlement adds significant non-taxpayer dollars to the bottom line. Our Medicaid Fraud Control Unit continues to play a critical role in holding these large pharmaceutical companies accountable for their actions that cost the State money and have consistently investigated them when they fail to play by the rules," said Attorney General Peter F. Kilmartin.

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.

The Medicaid Fraud Control and Patient Abuse Unit enforces the laws pertaining to fraud in Rhode Island's Medicaid program and prosecutes cases of abuse, neglect, or mistreatment of patients in all state healthcare facilities. The Unit prosecutes criminal activity, pursues civil remedies where appropriate, and participates with federal and state authorities in a variety of inter-agency investigations and administrative proceedings. In addition, the Unit works closely with federal and state authorities to investigate pharmaceutical companies that overbill and defraud the State's Medicaid program.

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