The multi-state agreement resolves allegations that Wyeth, which is based in Madison, Morris County, knowingly underpaid rebates it owed under the Medicaid Drug Rebate Program for sales of its Protonix Oral tablets and Protonix IV between 2001 and 2006. Protonix Oral tablets and Protonix IV are in a class of drugs called Proton Pump Inhibitors which inhibit the production of gastric acid.

Under the settlement, Wyeth has agreed to pay a total of $784.6 million to the federal government and the participating states. More than $371 million of that amount will go to the Medicaid Program. New Jersey will receive a total of $12.78 million.

The settlement announced today is rooted in two separate, unrelated qui tam or “whistleblower” lawsuits filed with the U.S. District Court in Massachusetts by relators Lauren Kieff and William LaCorte. The federal government, 35 states and the District of Columbia intervened in both of those lawsuits.

“The false statements and significant underpayment of Medicaid Drug Rebates alleged in this case costs every one of us in the end,” Acting Attorney General Lougy said. “Through our own efforts, and through collaboration with our state and federal partners, we are committed to combating Medicaid fraud and abuse.”

Pfizer, Inc. is a Delaware corporation headquartered in New York. Pfizer acquired Wyeth in 2009 -- after the conduct alleged in the two whistleblower lawsuits had occurred.

At all relevant times, Wyeth distributed, marketed and/or sold pharmaceutical products in the U.S., including Protonix Oral tablets and intravenous Protonix IV.

The Medicaid Prescription Drug Rebate Program was enacted by Congress in 1990 as a cost containment measure for Medicaid’s payment for outpatient drugs.

The Medicaid Drug Rebate Program requires participating pharmaceutical manufacturers to pay quarterly rebates to State Medicaid programs for each of its drugs sold to pharmacies that were reimbursed by Medicaid. The quarterly rebate was determined from each pharmaceutical manufacturer’s reported “Best Price,” or the lowest price for which it sold a covered drug in a particular quarter.

In their court filings, the participating states alleged that, during the third quarter of 2001 through 2006, Wyeth sold Protonix Oral tablets and Protonix IV to hospitals at discounted prices. The states alleged that Wyeth’s contracts with the hospitals created a “bundled” sale under the terms of the Medicaid Drug Rebate Agreement by linking discounts available to participating hospitals for Protonix IV to discounts on Protonix Oral tablets.

However, Wyeth did not treat the sales of Protonix Oral tablets and Protonix IV as bundled within the meaning of the Medicaid Drug Rebate Program, and therefore failed to properly allocate the discounts available under the contract.

As a result of this failure, Wyeth falsely reported its Best Prices for Protonix Oral tablets and Protonix IV. This caused the Unit Rebate Amount for Protonix Oral tablets and Protonix IV -- which is used to determine the quarterly rebate to pay the states for each drug -- to be understated during the relevant time period. The states alleged that Wyeth concealed, avoided or decreased its obligation to pay Medicaid Drug Rebates on Protonix Oral tablets, as well as Protonix IV.

Because the Medicaid program is jointly funded by the federal and State governments, Pfizer will pay in excess of $413 million of the $784.6 million settlement amount to the United States.

Deputy Attorney General Nina D. Bonner of the Office of Insurance Fraud Prosecutor handled the Wyeth matter on behalf of the State.

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