FOR IMMEDIATE RELEASE                                         CIV
TUESDAY, OCTOBER 31, 1995                          (202) 616-2765
                                               TDD (202) 514-1888

                                 
        DRUG COMPANY WILL PAY U.S. $7.5 MILLION TO SETTLE
     ALLEGATIONS IT FAILED TO INFORM GOVERNMENT ON CONTRACTS


     WASHINGTON, D.C. -- A generic drug distribution company will
pay the government $7.5 million to settle allegations it
overcharged the Department of Veterans Affairs for generic drugs,
the Department of Justice announced today.
     Assistant Attorney General Frank Hunger of the Civil
Division and U.S. Attorney James B. Burns of Chicago said the
settlement resolves charges brought against Modern Wholesale Drug
Midwest Inc., doing business as Rugby Laboratories, by a former
employee, Eileen Doran.  The case was brought under the qui tam
provisions of the False Claims Act in U.S. District Court in
Chicago, Illinois, in 1994.  
     The complaint alleged that Rugby failed to inform government
negotiators fully about its pricing policies.  The company gave
the government discounts that were lower than what it gave other
customers.  Under the contract solicitation and federal law,
Rugby was required to provide accurate information to VA contract
negotiators. 
     Rugby won a five-year, $40 million contract with the VA in
1991 for the sale of generic drugs that were used in VA
hospitals.  The contract set the prices, terms and conditions
under which federal agencies could purchase the drugs from Rugby.
     Under the settlement, Doran will receive $1,050,000 for
bringing the matter to the attention of the government.  Under
the qui tam provisions of the False Claims Act, a private party
can file an action on behalf of the United States and receive a
portion of the settlement if the government takes over the case
and prosecutes it successfully.  
      The case was investigated by the Office of Inspector
General of the VA.  The Civil Division and the Office of the U.S.
Attorney negotiated the settlement.
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95-556