<nettime> US: Bayer to pay $14 Million to settle charges

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US: Bayer to Pay $14 Million to Settle Charges of Causing Inflated 
Medicaid Claims

A three - year investigation of price manipulation by American drug 
companies scored its first important victory today when the Bayer 
Corporation agreed to cooperate with prosecutors and to pay $14 million 
in restitution to the federal government and the states. Under an 
agreement with the Justice Department and 45 states, Bayer settled 
charges that it had caused doctors and hospitals to submit inflated 
claims for prescription drugs used by Medicaid patients.

Federal officials and lawyers for Bayer said the agreement might set a 
precedent for major changes in the way the federal government and the 
states were paid for drugs bought through Medicaid, the federal-state 
program for low-income people. Bayer said it would cooperate with law 
enforcement authorities investigating similar pricing practices of 20 
other drug companies.

"This is the first settlement on the whole question of the prices paid 
for drugs by federal health programs," said Paul E. Kalb, a physician 
and a lawyer for Bayer from Sidley & Austin. "This is the case that 
charged drug manufacturers with defrauding the government by setting 
prices that were too high. Bayer has tried to respond constructively."

For at least seven years, the Justice Department said, Bayer overstated 
average wholesale prices for its drugs. Those prices are the benchmark 
used to set reimbursement rates under Medicaid and Medicare, the federal 
health insurance program for the elderly, though the settlement applies 
only to prices charged under Medicaid. In some cases, the federal 
government contends, Medicaid paid two to four times as much as 
commercial customers paid for selected drugs and
blood products.

As part of the settlement, Bayer will provide the government with data 
on its average selling prices, showing what it actually charges most 
commercial customers. Medicaid officials said they could use the data to 
set lower, more appropriate reimbursement rates. Bayer will pay $7.8 
million to the federal government and $6.2 million to the states, Dr. 
Kalb said. New York will receive more than $1.3 million, the largest 
share of the settlement paid to any state.

"This settlement is a significant victory," said Eliot L. Spitzer, the 
attorney general of New York. "It sends a strong message to other 
pharmaceutical manufacturers and health care providers that we will not 
allow them to enrich themselves at the expense of taxpayers and those 
most in need."

The money from Bayer "will be returned to the state's Medicaid program, 
which was a victim of Bayer's conduct," Mr. Spitzer said. Deputy 
Attorney General Jose Maldonado, director of the Medicaid fraud 
control unit in New York, said, "With Medicaid prescription costs in 
this state now exceeding $2.5 billion a year, it is unconscionable that 
this renowned drug maker would inflate the cost of its products and 
stick state taxpayers with the bill."

A whistle-blower had sued Bayer and other drug manufacturers under the 
False Claims Act, and the federal government was investigating the 
allegations. In return for Bayer's $14 million payment, the government 
agreed to end its investigation and to relinquish claims it might have
had against the company.

Dr. Kalb, the lawyer for Bayer, gave this example of how reimbursement 
works: "A manufacturer sells a drug to a customer for 30 cents a dose, 
but sets the average wholesale price at $1 a dose. Medicaid reimburses 
the doctor or hospital $1 a dose. Medicaid thus pays $1 for a product 
that the health care provider bought for 30 cents."

Charles S. Miller, a spokesman for the Justice Department, said, "We do 
believe that Bayer violated the False Claims Act." But Dr. Kalb said: 
"Bayer denies all liability. It denies that it violated the False Claims 
Act."

The Bayer Corporation, with headquarters in Pittsburgh, is the American 
unit of Bayer A.G., which is based in Leverkusen, Germany. The 
investigation focused on prices set by Bayer for Kogenate and Koate-HP, 
which are blood products used to treat hemophilia, and Gamimmune, which 
is widely used to treat immune deficiency diseases.

Source: New York Times, January 24, 2001

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