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Attorney General Marty Jackley

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McKesson Agrees to Pay States over $151 Million Dollars to Resolve False Claim Pricing Case

FOR IMMEDIATE RELEASE :     Tuesday, July 31, 2012  
CONTACT:    Sara Rabern,  (605) 773-3215

McKesson Agrees to Pay States over $151 Million Dollars to Resolve False Claim Pricing Case 

PIERRE, S.D  -  Attorney General Marty Jackley announced today that South Dakota, as part of a national settlement against the McKesson Corporation, has resolved allegations that McKesson violated the Federal False Claims Act and various state false claims acts. The case involved reporting inflated pricing data for a large number of prescription drugs, causing the state’s Medicaid program to overpay for those drugs. Medicaid is funded jointly by the federal government and South Dakota.

“We are pleased that State of South Dakota’s Medicaid Program will receive $380,300.78 as part of this multistate settlement,” said Jackley. “The settlement reiterates the importance of keeping drug prices affordable for the consumer and ensuring that state programs are not being compromised through inflated prices by pharmaceutical companies.”

The drug pricing data at issue in this settlement concerns the “Average Wholesale Price” (AWP) benchmark used by most states, including South Dakota, to set pharmacy reimbursement rates for pharmaceuticals dispensed to South Dakota Medicaid beneficiaries.  South Dakota alleges that McKesson, one of the largest drug wholesalers in the country, reported inflated AWP pricing data to First Data Bank (FDB), a publisher of drug prices, thereby inflating many AWPs that are used by South Dakota to set reimbursement.  In April, the federal government settled the federal portion of this lawsuit for over $187 million; this agreement recovers the state Medicaid share for South Dakota.

South Dakota’s share of the recovery is $380,300.78, which will go to the state general fund. The overall recovery attributable to South Dakota’s Medicaid program (representing McKesson’s April 2012 payments to the federal government for damages suffered by South Dakota’s Medicaid program, combined with the state settlement announced today), is $1,145,260.90, of that amount $764,960.12 is the Federal Medicaid share.

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