Attorney General's News Release

July 30, 2004

Claritin maker to pay $9.3 million to Missouri after company shorted Medicaid on rebates, Nixon says

Jefferson City, Mo. — Schering Plough, the manufacturer of Claritin, will pay more than $9.3 million to Missouri in a settlement resolving concerns the company underpaid the Medicaid program in rebates for the popular antihistamine. The Missouri portion is part of a $282 million nationwide agreement in principle announced today, Attorney General Jay Nixon says.

The settlement resolves the contention of the states, the federal Department of Justice and the federal Center for Medicaid and Medicaid Services (CMS) that Schering 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.

"Medicaid programs pay for a substantial portion of the prescription drugs used in this country, and these rebates help lessen the burden on taxpayers," Nixon says. "By paying double damages, Schering is finding out there is a hefty price to pay when you try to circumvent the rules and cheat taxpayers."

The government contended that Schering entered into agreements with CIGNA and Pacificare, two large HMOs, to sell its Claritin products to these HMOs at certain prices. Under pressure from the HMOs over the price of Claritin, Schering gave them substantial price concessions. The concessions had the effect of lowering the price of Claritin below the price Schering reported as its "best price" to CMS.

As a result, from the first quarter of 1998 through the fourth quarter of 2000, the states received almost $141 million less in rebates from Schering than they would have if the true "best price" had been reported. The $282,343,012 nationwide settlement represents double damages allowed under the law.

The Missouri Medicaid program will receive $3,692,662 from the $9,377,383 directed to the state. The balance — $5,684,721 — will go to the federal government for its share of the Medicaid costs incurred in Missouri. Schering already has paid $1,824,565 of the $9.3 million covered in the settlement.

The settlement also calls for Schering to enter a guilty plea to the federal anti-kickback statute and pay a fine of $52.5 million. As part of the agreement, the U.S. Department of Health and Human Services Inspector General will require Schering to certify its "best price" methodology in the future to ensure the proper rebates are paid.

Since December 2003, Nixon has obtained more than $19 million in "best price" settlements involving pharmaceutical companies. GlaxoSmithKline paid $2.7 million for not accurately reporting the best price information for the nasal spray Flonase and the anti-depressant Paxil. The Missouri Medicaid program received $1.5 million of that amount. Bayer Corp. paid $7.1 million total — $3 million of which went to the state Medicaid program — over incorrect rebates paid on an antibiotic and an anti-hypertensive drug.

In addition, earlier this year Bristol-Myers Squibb paid $909,000 to reimburse state entities and $164,000 to individual Missourians in a settlement with Nixon that resolved a lawsuit over that said BMS unfairly delayed a lower-priced generic of the anti-cancer drug Taxol from reaching the market.

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