Texas AG Wins $8.5M Settlement in Civil Medicaid Fraud Case

Texas Attorney General Greg Abbott announced the recovery of $8.5 million from Baxter Healthcare Corp. as a result of the company’s scheme to falsely report the prices of certain drugs in order to defraud the Texas Medicaid program.

The case is another in a series of state “whistleblower” cases with several defendants that have been settled since 2003. To date, these cases have resulted in the Attorney General’s recovery in excess of $64 million for Texas.

“This case further proves we will effectively use the legal system to retrieve funds wrongly taken from the Medicaid program for the needy,” said Attorney General Abbott. “We are pleased this company chose to cooperate instead of fighting the state, but regardless, those who ignore the law in the pursuit of illegal profits must pay for the error of their ways.”

The Attorney General sued Baxter, an Illinois company, as well as Abbott Laboratories and B. Braun Medical in May 2004. The suit alleged the three schemed to falsely report the prices of intravenous fluids and injectable medications to the state’s Vendor Drug Program, a part of the Medicaid system. The lawsuit against the other two defendants continues.

Baxter manufactures and markets generic and brand-name drugs and products that are dispensed to Medicaid patients, and it competed with Abbott and B. Braun for these sales. As early as 1995, the three began to falsely report prices of the products, guaranteeing profits for their pharmacy customers at the expense of the taxpayer-funded health care program.

Drug manufacturers, including these defendants, who want their drugs to be eligible for Medicaid reimbursement must report prices that are currently and generally available on the market to the Medicaid program.

The defendants’ false price reports led Medicaid to reimburse pharmacies at rates vastly above current market prices. This windfall induced the defendants’ customers to favor business relations with these companies, creating a long-term, but illegal, market niche.

Ven-a-Care of the Florida Keys Inc. brought the scheme to the state’s attention, as it did in 1999 with drug giant Schering-Plough Corp., which resulted in the nation’s first state lawsuit of this type filed in September 2000. Schering-Plough settled its lawsuit with the state in May 2004 for $27 million. Co-defendants Dey Inc. settled in June 2003 for $18.5 million, and Boehringer Ingelheim Corp. and subsidiary Roxane Laboratories settled last November for $10 million.

Texas continues to be a leader among states in pursuing these schemes that harm the Medicaid program. Attorney General Abbott is actively investigating fraud in the marketplace and companies that defraud Medicaid.

With the passage of stronger amendments to the Texas Medicaid Fraud Prevention Act, the Texas Legislature in 1997 paved the way for whistleblower lawsuits involving credible industry insiders such as Ven-a-Care. Under the law, whistleblowers may be eligible for a percentage of the damages recovered.

Source: Texas Attorney General’s Office