Attorney General's News Release

January 9, 2004

Nixon returns more than $3 million to state Medicaid program in settlement with Bayer Corp. on drug pricing

Jefferson City, Mo. — The Missouri Medicaid program today received $3,090,958 from Attorney General Jay Nixon as a result of a settlement Nixon, other state attorneys general and the federal government reached with drug manufacturer Bayer Corp. The settlement resolves the concerns of the states over the amount of rebates offered to Medicaid programs by Bayer for the antibiotic Cipro and the anti-hypertensive drug Adalat CC.

The $242 million settlement was split between 49 states, the District of Columbia and the federal government, which jointly fund the Medicaid program. Nixon says Missouri received $7,156,135 total, $4,065,177 of which went to the federal government for its share of the state's Medicaid funding.

"It is particularly gratifying to return this money to Missouri taxpayers now, at a time when state agencies face greater financial challenges in serving our citizens," Nixon says. "We're going to continue to be aggressive in protecting the integrity of the Medicaid program, as this settlement demonstrates."

The states, the federal Department of Justice and the federal Center for Medicaid and Medicare Services (CMS) contended that Bayer violated a federal Medicaid drug rebate statute requiring pharmaceutical manufacturers to accurately report "best price" information. "Best price" is the lowest price that a manufacturer offers its products for sale to commercial purchasers. CMS uses this information to calculate rebates payable by the manufacturers to the state Medicaid programs under the statute.

The government contended that Bayer sold Cipro and Adalat CC to HMOs at deeply discounted prices and then concealed that fact by re-labeling or re-packaging these drugs under the HMO's private label. The practice — referred to as "lick and stick" — enabled Bayer to avoid paying additional rebates to the Medicaid program from 1995 to 2000.

As part of the agreement, the U.S. Department of Health and Human Services Inspector General will require Bayer to certify its "best price" methodology in the future to ensure the proper rebates are paid.

On Dec. 23, Nixon presented the Missouri Medicaid program with a check for more than $1.1 million from a settlement with drug maker GlaxoSmithKline over similar "best price" allegations concerning Flonase and Paxil.

The Medicaid Fraud Control Unit of the Attorney General's Office, formed by Nixon in 1994, has authority under state law to investigate and prosecute, both civilly and criminally, allegations of fraud against Missouri's Medicaid program.

Inquiries from consumers should be directed to consumer@ago.mo.gov or 1-800-392-8222 (from within Missouri) or 573-751-3321 (outside Missouri).

All media inquiries should be directed to Press Secretary John Fougere.

E-mail      Phone: 573-751-8844         Fax: 573-751-5818