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Attorney General Jason R. Ravnsborg

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AstraZeneca Pharmaceuticals, LP and Cephalon, Inc. Settle Allegations


FOR IMMEDIATE RELEASE :    Monday, November 09, 2015
CONTACT:  Sara Rabern (605)773-3215   

AstraZeneca Pharmaceuticals, LP and Cephalon, Inc. Settle Allegations
that they Overcharged the State Medicaid Programs for Drugs 

PIERRE, S.D –   Attorney General Marty Jackley announces that South Dakota has joined with other states and the federal government to settle allegations that AstraZeneca Pharmaceuticals, LP, and Cephalon, Inc., overcharged the state Medicaid programs for drugs.  AstraZeneca, a London and Delaware-based pharmaceutical manufacturer, has paid the states and the federal government $46.5 million to resolve allegations against the company.  Cephalon, a Pennsylvania-based subsidiary of Teva Pharmaceuticals Industries, Ltd., has paid the states and the federal government $7.5 million to settle similar allegations. 

Specifically, these settlements resolve allegations that AstraZeneca and Cephalon underpaid drug rebates owed to the states.  Under a federal law known as the Medicaid Drug Rebate Program, drug manufacturers must periodically return a portion of the amount paid by state Medicaid programs for the manufacturers’ drugs.  The rebate program is designed to ensure that states pay competitive prices for drugs, and the rebates for a manufacturer’s drugs are calculated based on a percentage of the average prices drug wholesalers pay for each of the drugs.  This average price, which the manufacturer reports to the federal government, is known as the Average Manufacturer’s Price or “AMP”. The greater the AMP reported by the manufacturer, the greater the rebate the manufacturer must pay for that drug. 

The whistleblower’s complaint alleged that AstraZeneca and Cephalon improperly treated certain fees paid to wholesalers as “discounts,” and that the effect of this accounting practice was to falsely decrease the AMP the companies reported to the federal government, improperly decreasing the rebates paid to the states.

The total portion of the settlement amount recovered by South Dakota is $142,790.25, of which $92,314.49 will be retained by the federal government as the federal Medicaid share. The remaining $50,475.76 will go to the state general fund to offset alleged Medicaid damages in this case.

The South Dakota Medicaid Fraud Control Unit and the South Dakota Department of Social Services assisted in recovering the settlement money.