These settlements arose from qui tam cases filed by Ven-A-Care, a Florida-based
independent pharmacy. The case against Bayer was brought in a Miami federal court
in 1995 as part of a larger case against 20 pharmaceutical companies. In the
fall of 2000, similar suits against Dey and Schering-Plough were initiated in
Texas state court.
The Practices: "Marketing the Spread" and Concealment of Best Price
In 1995, Ven-A-Care, an independent pharmacy, filed a qui tam case alleging that Bayer inflated the Average Wholesale Price ("AWP") of hemophilia and immune deficiency therapies, specifically Kogenate, Koate-HP, and Gamimmune. The complaint alleged that Bayer was "marketing the spread" to physicians and home health care agencies responsible for administration of the drugs by offering them deep discounts. Furthermore, Bayer allegedly did not include the discounts in its Best Price reports submitted to the government. As a result of the suit, Bayer settled with the Department of Justice ("DOJ") and 45 other states for $14 million in January 2001.
In the fall of 2000, the Texas Attorney General filed a lawsuit under the Texas false claims statute against Boehringer Ingelheim, Dey Laboratories and Schering-Plough based on information provided by Ven-A-Care. Ven-A-Care alleged that both Schering-Plough and Dey inflated the AWP for asthma inhalants, namely Albuterol Sulfate and Ipratropium Bromide, and marketed the spread to pharmacists. In addition, Dey allegedly reported false wholesaler and distributor prices for asthma inhalants to the Texas Vendor Drug Program. In 2003, Dey and the Texas Attorney-General reached a settlement of $18.5 million. On the heels of the Dey settlement, Schering-Plough and its subsidiary Warrick Pharmaceuticals agreed to a $27 million settlement covering five different albuterol products.
In the Dey case, the "spread" was marketed to pharmacists, rather than to physicians as in the TAP and Astra-Zeneca cases discussed above. Medicaid reimburses pharmacists for the cost of ingredients as well as the cost of dispensing the drugs, which is often referred to as a dispensing fee. In order to create a spread and incentivize pharmacists to use their product, pharmaceutical companies can either (a) raise the reported cost of the ingredients; or (b) lower the total price paid to the manufacturer by the pharmacy. In either case, the pharmacist will make a profit.
The Whistleblowers
Ven-A-Care is a Florida independent pharmacy which specialized in in-home intravenous drug treatments, particularly AIDS treatments. In 1991, Ven-A-Care began to receive reimbursements from Medicare in the hundreds of dollars for drugs that it had purchased from the manufacturer for only about $50. Ven-A-Care returned the checks to Medicare, thinking there was a mistake. Medicare sent the checks back, citing the AWP "book" price and saying there was no mistake. Thus Ven-A-Care learned about "marketing the spread." As the 1990s progressed, more and more drug salespeople marketed their products to Ven-A-Care on the basis of higher profits for Ven-A-Care on the spread rather than therapeutic benefit.
Ven-A-Care's principals went to extraordinary lengths to have the government address conduct they were convinced was fraudulent. They contacted Medicare, congressmen, the FBI, and the Inspector-General's Office ("OIG") in the Department of Health and Human Services ("HHS"). At one point, in frustration, they sent Medicare officials a complaint about an AWP of $400 for a nutrition drug for which they had paid $30 together with a toilet seat, echoing the defense procurement abuses of the 1980s. In 1994, they filed their qui tam suit against 20 pharmaceutical companies.
In 2001, Ven-A-Care received a 20 % share of the federal government recovery in Bayer, totaling roughly $1.6 million. Following the Dey settlement on June 11, 2003, Ven-A-Care received a share of $3.2 million. The May 2004 Schering-Plough settlement yielded another $5.4 million in qui tam share to Ven-A-Care. The remaining federal and related state lawsuits are reportedly ongoing.
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