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WASHINGTON, D.C.- Bayer Corporation has agreed to pay a total of $14 million to the

United States and 45 states to settle allegations under the federal False Claims Act that the company caused physicians and other health care providers to submit fraudulently inflated reimbursement claims to the state and federally funded Medicaid program, the Justice Department announced today. Bayer reached the agreement with the Justice Department, the United States Attorney's Office for the Southern District of Florida in Miami, the Office of Inspector General for the Department of Health and Human Services, and a team of state negotiators from Maine, Nevada, New York and Washington representing the National Association of Medicaid Fraud Control Units.

The government's investigation of the allegations, contained in a qui tam or whistleblower lawsuit, in which the government plans to intervene against Bayer, revealed that the pharmaceutical company beginning in the early 1990's falsely inflated the reported drug prices . referred to by the industry as the Average Wholesale Price (AWP), the Direct Price and the Wholesale Acquisition Cost . used by state governments to set reimbursement rates for the Medicaid program. By setting an extremely high AWP and, subsequently, selling the product to doctors at a dramatic discount, Bayer induced physicians to purchase its products rather than those of competitors by enabling doctors to profit from reimbursement paid to them by the government.

The Bayer AWPs, at issue in the investigation, involved several of Bayer's biologic products such as Kogenate, Koate-HP, and Gamimmune, which are widely used in treating hemophilia and immune deficiency diseases.

The investigation further revealed that the practice in which Bayer selectively engaged, commonly referred to by drug manufacturers as "marketing the spread," also has the effect of discouraging market competition from manufacturers that do not inflate AWPs as a way of inducing doctors to purchase their products.

In addition to the monetary settlement, Bayer has reached a five year agreement with the Department of Health and Human Services' Office of Inspector General that the company's conduct will be monitored by the government under a corporate integrity agreement. Under the compliance agreement, Bayer will provide the state and federal governments with the average selling prices of its drugs in order to facilitate the government's setting of fair reimbursement rates for the company's products and, potentially, the products of any competitors attempting to take advantage of Bayer's cooperation.

The parties also are settling allegations that Bayer knowingly underpaid the Medicaid program for rebates owed by it to the states. The Medicaid Rebate program requires drug companies to pay quarterly rebates to states in a way intended to account for discounts given by them to customers. Bayer was required to report to the Health Care Financing Administration the best price it offered to any commercial, for-profit customer and pay a quarterly rebate based, in part, upon that best price. Bayer understated the extent of the discounts given to certain customers thereby allowing the company to underpay the rebates its owed.

Ven-A-Care of the Florida Keys Inc., the qui tam relator or whistleblower which filed the suit on behalf of the United States, will receive 20 percent of the federal government's share of the recovery. Bayer's headquarters are located in Leverkusen, Germany.