Drug firm Wyeth accused of defrauding Medicaid

By Devlin Barrett
Associated Press / May 19, 2009
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WASHINGTON - The Justice Department accused Wyeth, one of the nation's biggest drug makers, yesterday of cheating Medicaid programs out of hundreds of millions of dollars by overcharging for a stomach acid drug.

The Justice Department and more than a dozen states have joined in two whistle-blower lawsuits against the Madison, N.J.-based drug company filed in federal court in Massachusetts.

The government is seeking financial penalties against the company of up to three times the amount lost by Medicaid. And if a settlement is reached, the two whistle-blowers who filed the original suits likely would be entitled to some share of the sum.

The court papers allege that between 2000 and 2006, Wyeth offered steep discounts to thousands of hospitals for two versions of Protonix, a drug that suppresses stomach acid.

By law, manufacturers of brand-name drugs are required to offer the same rebates to state Medicaid programs that they provide to other customers.

The government alleges the maneuver helped the company avoid paying hundreds of millions of dollars in rebates to Medicaid, a healthcare program for the poor that is funded by state and federal money.

"By offering massive discounts to hospitals, but then hiding that information from the Medicaid program, we believe Wyeth caused Medicaid programs throughout the country to pay much more for these drugs than they should have," Assistant Attorney General Tony West said in a written statement.

In court papers, the government accused the drug company of bundling the intravenous version of Protonix with the oral version in sales packages to hospitals, in the hopes of making more money in the lucrative outpatient market.

Wyeth defended its pricing plan. "The company believes that its pricing calculations were correct and intends to defend itself vigorously in these actions," said Doug Petkus, a Wyeth spokesman.

Wyeth's shares fell 50 cents to $44.37 in after-hours trading.

The states joining the lawsuit are California, Delaware, Florida, Illinois, Indiana, Louisiana, Massachusetts, New York, Michigan, Nevada, New Hampshire, Tennessee, Texas, Virginia, and Wisconsin, as well as the District of Columbia.

Pfizer Inc. of New York is in the process of buying Wyeth for more than $60 billion in a deal expected to close later this year.