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Attorney General Jackley Announces Settlement with AmericansouceBergen

FOR IMMEDIATE RELEASE:  Tuesday, October 2, 2018
CONTACT:  Sara Rabern (605) 773-3215 

PIERRE, S.D. - Attorney General Marty Jackley announced today that South Dakota has joined with other states and the federal government to reach an agreement in principle with the pharmaceutical distributor AmerisourceBergen Corporation (“ABC”) to settle allegations that the company introduced adulterated drugs into interstate commerce. ABC will pay the states and the federal government $625 million dollars.
The total portion of the settlement amount recovered by South Dakota is $62,294.64, of which $39,800.60 will be retained by the federal government as the federal Medicaid share. The remaining $22,494.04 will go to the state general fund to offset alleged Medicaid damages in this case.

Additionally, ABC subsidiary, AmerisourceBergen Specialty Group (“ABSG”), pleaded guilty to illegally distributing misbranded drugs in September 2017.  ABSG is the parent entity for companies in the specialty pharmaceutical market, including biotechnology and oncology, in addition to pharmaceutical manufacturers and providers.  ABSG agreed to pay $260 million in criminal fines and forfeitures. 

The national federal and state civil settlement resolves allegations concerning conduct of a purported pharmacy ABSG opened in Dothan, Alabama named Medical Initiatives, Inc. (“MII”).  MII pooled vials of oncology supportive care drugs used during chemotherapy to create Pre-filled Syringes (PFS) to sell to practitioners. The drugs involved in the scheme include Aloxi®, Anzemet®, Kytril®, Neupogen®, Procrit®, as well as the generic version of Kytril®. The investigation revealed that MII was not a pharmacy, but a repackager, and as such, required to apply for a New Drug Application (NDA) for the PFS.  To prepare the PFS, MII broke the seal of the FDA-approved drug vials and repackaged them into plastic syringes that allowed MII to sell the excess drug product in the vials, known as “overfill.”  The PFS, which were prepared in an unsterile environment and often contained particles of foreign matter, were then shipped to providers through another branch of ABSG, Oncology Supply Company (“OSC”).

MII was neither a pharmacy in producing and selling the PFS nor did it comply with pharmacy regulations in any state where it was licensed. Additionally, since there was no new NDA, the drugs were unapproved by the FDA and adulterated, therefore not eligible for reimbursement by government healthcare programs.   The civil settlement also resolves double billing for the same vial of drug as a result of using the overfill drug product and unlawful kickbacks provided to physicians to induce them to purchase Procrit® in PFS rather than vials.  

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

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