California Attorney General Rob Bonta today announced a $75 million nationwide settlement with global pharmaceutical company Bristol Myers Squibb (BMS), resolving allegations that BMS underpaid the drug rebates owed to Medi-Cal and other state Medicaid programs. According to a complaint filed by a whistleblower, BMS overcharged the states for its pharmaceuticals by decreasing the rebate amount the company, like other drug manufacturers, must periodically pay to ensure that states pay competitive prices for pharmaceuticals. Of the $75 million BMS will pay to resolve the allegations against the company, $41,360,522.93 will go to the federal government and $33.639,477.07 to the states involved. California’s share of the settlement is $2,356,842.71.
“Using falsification and deception to underpay drug rebate payments to Medi-Cal undermines Medi-Cal’s ability to look after the millions of Californians who rely on the program for their essential, even life-saving medications,” said Attorney General Bonta. “We will continue to step in when corporations make decisions that compromise the interests, health, and wellbeing of our state’s residents.”
BMS is a pharmaceutical company that manufactures prescription drugs and biologics. A federal law known as the Medicaid Drug Rebate Program requires manufacturers to pay rebates to state Medicaid programs. Rebates are calculated based on the average price drug wholesalers paid the company for each drug that quarter. The price is known as the Average Manufacturer’s Price or AMP. The greater the reported AMP, the greater the rebate the manufacturer owes. To trim the actual amount BMS owed under the rebate program, the company falsely treated wholesalers’ fees for services such as restocking, inventory management, and distribution as “discounts”, deducting them from their reported AMP. As a result of BMS’s underreported AMP, the company underpaid their rebate amount and overcharged state Medicaid programs for its pharmaceuticals.
The settlement agreement is a result of the California Department of Justice’s Division of Medi-Cal Fraud and Elder Abuse (DMFEA) working with a team of other states. Through the DMFEA, the California Department of Justice works to protect Californians by investigating and prosecuting those who perpetrate fraud on the Medi-Cal program. DMFEA also investigates and prosecutes those responsible for abuse, neglect, and fraud committed against elderly and dependent adults in the state. The Division regularly works with whistleblowers and law enforcement agencies to investigate and prosecute crimes.