Dava Pharmaceuticals to Pay Us $11 Million To Settle False Claims Act Allegations
Baltimore, Maryland – Dava Pharmaceuticals Inc. has agreed to pay the United States $11 million to settle allegations that it violated the False Claims Act by misreporting drug prices in order to reduce its Medicaid Drug Rebate obligations
The settlement was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Tony West, Assistant Attorney General for the Civil Division of the Department of Justice; and Special Agent in Charge Nicholas DiGiulio, Office of Investigations, Office of Inspector General of the Department of Health and Human Services.
The settlement resolves allegations that between Oct. 1, 2005 and Sept. 30, 2009, Dava and its corporate predecessors knowingly underpaid their rebate obligations under the Medicaid Prescription Drug Rebate Program. Under that program, participating drug companies are required to pay quarterly rebates to state Medicaid programs based, in part, on whether a drug is a “generic” or “branded” product and the difference between what the health care program paid for the drug and prices paid by other purchasers.
The government contends that in order to reduce its Medicaid rebate obligation, Dava incorrectly treated its version of the drugs cefdinir, clarithromycin and methotrexate as “generic” drugs rather than “branded” products, thereby lowering the overall percentage rebate payable to Medicaid. In addition, Dava further reduced its Medicaid rebate obligations by incorrectly calculating average manufacturer prices for its versions of the drugs cefdinir, clarithromycin, methotrexate and rheumatrex. As a result, the government alleges that Dava underpaid drug rebates to the Medicaid program and overcharged certain public health service entities for these products.
“Pharmaceutical companies that participate in Medicaid must accurately report drug prices and pay their fair share of rebates to the federal and statement governments,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “Settlements like this one help maintain important programs on which so many depend for needed health care.”
The federal government’s portion of the settlement is approximately $5.7 million. Dava will also pay over $5 million to the Medicaid participating states and approximately $200,000 to certain public health services entities who paid inflated prices for the drugs at issue.
The case came to light when a whistleblower, Jim Conrad, filed a lawsuit alleging that Dava Pharmaceuticals violated the civil False Claims Act. Enacted during the Civil War, the False Claims Act is the government’s primary civil tool to combat fraud and abuse in federal programs and procurement. The qui tam provisions of the Act permits private parties to file an action on behalf of the United States and receive a portion of the recovery if the government takes over the case and reaches a monetary settlement with the defendants. As part of today’s resolution, the whistleblower will receive 15 percent of the settlement proceeds.
This resolution is part of the government’s emphasis on combating health care fraud and another success for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover more than $6.6 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $8.8 billion.
The settlement was a result of an investigation by the U.S. Attorney’s Office for the District of Maryland, the Justice Department’s Civil Division, the Department of Health and Human Services’ Office of Inspector General and Office of Counsel to the Inspector General, and the National Association of Medicaid Fraud Control Units. The case was handled by Assistant U.S. Attorney Thomas Corcoran and Trial Attorney Adam J. Schwartz of the Justice Department Civil Division.