- The Washington Times - Tuesday, October 29, 2002

Pfizer Inc. and its subsidiaries, Warner-Lambert and Parke-Davis, agreed yesterday to pay $49 million to settle accusations that the company violated the False Claims Act, the Justice Department said.
Federal prosecutors had accused the firm and the subsidiaries of fraudulently avoiding the payment of full rebates owed to state and federal governments, under the national drug Medicaid rebate program, for cholesterol-lowering drug Lipitor.
"The Medicaid program was created to help ensure that those with lower incomes receive medical treatment not to enrich drug companies or providers," said Assistant Attorney General Robert D. McCallum Jr., who heads the department's civil division.
"The Medicaid rebate program plays a critical role in helping the state and federal governments control ever-increasing drug costs," he said.
Congress enacted the rebate program in 1991 to ensure that state Medicaid programs and the federal government do not overpay for the cost of providing drugs to Medicaid beneficiaries. The rebate program is embodied in the Medicaid rebate agreement that drug companies sign with the federal government in exchange for having their products approved for use by Medicaid beneficiaries.
Parke-Davis Labs, then a subsidiary of Warner-Lambert, which was subsequently acquired by Pfizer in 2000, was accused of overstating the Lipitor best price in the first and second quarters of 1999 by concealing $250,000 of cash discounts given to a key managed care customer in Louisiana in exchange for favorable status on the latter's drug formulary.
The government said that the unreported discounts allowed Parke-Davis/Warner-Lambert to retain more than $20 million in rebates owed to the Medicaid program.
In addition to the $49 million settlement payment, Pfizer will enter into a five-year corporate integrity agreement with the Department of Health and Human Services' (HHS) Office of Inspector General. The integrity agreement includes requirements that Pfizer certify its best-price processes and maintain internal procedures designed to prevent problems in compliance with the rebate program.
"Pharmaceutical companies have a responsibility to be good corporate citizens and to be fair and honest in their dealings with Medicaid, Medicare and the other government health care programs," said HHS Inspector General Janet Rehnquist.
"As a condition of this settlement, Pfizer must implement and maintain policies and procedures designed to ensure the full and accurate reporting of discounts and other pricing data used to calculate Medicaid rebates," she said.
The settlement amount will be divided between the federal government and the states that did not receive the full Medicaid rebates owed by Parke-Davis/Warner-Lambert. The U.S. government will receive $27.9 million plus accrued interest. The remainder of the settlement amount, $21 million plus accrued interest, will be shared among 40 states.
David Foster, a former Parke-Davis/Warner-Lambert employee in the company's southeast region, was the whistleblower who filed the initial suit on behalf of the U.S. government. He will receive 21.3 percent of the federal government's portion of the recovery or $5.9 million.

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