Health Law & Business News

Bristol-Myers Squibb Must Answer Medicaid Fraud Allegations

Nov. 30, 2018, 6:13 PM

Bristol-Myers Squibb will have to answer allegations it manipulated the calculation of its Medicaid rebate to pay substantially less than it owed from 2007 to 2016.

The U.S. District Court for the Eastern District of Pennsylvania Nov. 29 declined the pharmaceutical giant’s motion to dismiss the allegations brought by the former CEO of the Healthcare Distribution Management Association, Ronald Streck. Streck alleged the company used two schemes to defraud Medicaid—one in which the company mischaracterized service fees as discounts and one in which it disguised price increases as service fees.

The court said Streck sufficiently stated his case for it to move forward.

The Medicaid program requires a drug manufacturer to enter into a national rebate agreement with the government in exchange for state Medicaid coverage of most of the manufacturer’s drugs. The rebate calculation includes the average price a wholesaler pays the manufacturer on a per-unit basis for a drug. The manufacturer calculates that figure for each drug and reports it to the Centers for Medicare & Medicaid Services every quarter. The CMS uses it to determine the rebate the manufacturer owes the states.

Streck alleges Bristol-Myers underreported its average manufacturer price by subtracting service fees from the drug price from Jan. 1, 2007 through Dec. 31, 2013, then describing them as discounts. This distinction is critical because service fees are excluded from the rebate calculation, while discounts and price increases are part of it. Streck also alleges Bristol-Myers used price appreciation clauses in service agreements to disguise price increases as service fees from Jan. 1, 2014 until March 31, 2016.

Streck is represented by Berger Montague PC in Philadelphia, Martin Law PC in Tysons Corner, Va., and Faruqi & Faruqi LLP in Philadelphia. Bristol-Myers Squibb is represented by King & Spalding in Washington and Armstrong Teasdale in Philadelphia.

The case is United States ex rel. Streck v. Bristol-Myers Squibb Co., E.D. Pa., No. 13-7547, motion to dismiss denied 11/29/18.

To contact the reporter on this story: Matt Phifer in Washington at mphifer@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

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