Medicare Compliance & Reimbursement
Firms Should Be Vigilant On Reporting Drug Prices
Blockbuster drug? In the feds' book it's becoming a code word for blockbuster settlement.
Schering-Plough Corp. is the latest to take a multi-million dollar hit from the Department of Justice for marketing ploys the department claims are way out of line.
Under the terms of the settlement, the drug giant will pay the government, 50 state Medicaid programs, and some public health service entities more than $290 million to resolve a civil suit that it concealed its true best price for its top-selling allergy medication Claritin, U.S. Attorney Patrick Meehan said July 30.
Schering Sales Corp., the sales and marketing subsidiary of the drug manufacturer, will plead guilty to criminal charges and pay a $52.5 million fine for allegedly violating the anti-kickback statute. Investigators say that in the '90s when Claritin was Schering Sales' best-seller, the drug was substantially more expensive than its main competitor, Allegra. When a powerful health maintenance organization demanded a price reduction in Claritin, Schering Sales allegedly refused because, according to the DOJ, it would have had to lower the price for Medicaid as well.
To keep the drug on the HMO's formulary without disturbing Medicaid revenues, Schering Sales reportedly worked out a $10 million "value-added package" to make up the difference between the price of Claritin and Allegra. This included paying the HMO an annual "data fee" of approximately $2.4 million - a disguise that "gave the appearance that the fee was a fair market value transaction rather than a hidden inducement," the DOJ says.
"Schering used terms like 'data fee' and 'value added' as camouflage for what was nothing more than an old-fashioned kickback," said Meehan. "This wasn't a mistake. It was a marketing strategy."
Schering Plough Corp. will enter into a Corporate Integrity Agreement with the Department of Health and Human Services that addresses sales, marketing and pricing of its drugs to government programs, and includes five years of independent audits. Schering Sales Corp. will be excluded from all federal health care programs for at least five years.
In a July 30 statement Brent Saunders, senior vice president of Global Compliance and Business Practices at Schering-Plough, called the agreement an important step in the company's "transformation."
"Since the new management team came on board beginning in April 2003, we have been working tirelessly to put other issues from past years behind us, while building a company in which business integrity helps to drive high performance," Saunders said.
The Centers for Medicare & Medicaid Services Administrator Mark McClellan laid out the moral for pharma companies: "We will be watching closely to assure the accuracy of the information reported on drug prices," he said.
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