Pharmaceuticals:
PRIVATE LABELING LEADS TO CRIMINAL FINES
Published on Wed May 21, 2003
The feds mean business when it comes to drug pricing improprieties. Case in point: A federal judge May 8 sentenced Bayer Corp. after the company pleaded guilty to a felony charge connected with a private labeling scheme. Judge Richard Stearns ordered the company to pay a $5.6 million criminal fine. The fine is just the tip of the iceberg, however. The company also will pay about $250 million to settle related civil claims. The Department of Justice maintains that Bayer engaged in "private labeling" for Kaiser Permanente. Bayer gave Kaiser a low price and affixed slightly different labels to the products it sold the HMO - labels that allowed the drugmakers to avoid reporting the discounted Kaiser prices to the federal government. That enabled Bayer to evade paying some of its rebates to Medicaid, which are designed to ensure that the government receives the lowest drug price offered to other purchasers. Lesson Learned: The Bayer criminal case shows that the DOJ means business in its hunt for those who violate Medicaid rebate rules.