In January 2019, Illinois Attorney General Lisa Madigan announced that her office settled with Teva Pharmaceuticals USA Inc., for $135 million, to resolve allegations that Teva inflated the wholesale prices used in setting the rates for Medicaid reimbursements.
The settlement was fourteen years in the making, stemming from a 2005 lawsuit filed by Madigan against 47 drugmakers for deceptive practices related to the Average Wholesale Price (AWP) of numerous prescription drugs. The lawsuit alleged that the companies fraudulently published inflated AWPs, which were in turn used by Medicaid programs to determine the reimbursement amounts for Medicaid patients. Madigan alleged, therefore, that the inflated drug prices resulted in the overpayment of drug costs by the state of Illinois.
“I am pleased that today’s settlement will provide $135 million for the state,” Madigan said. “In total, as a result of my 2005 lawsuit, my office has recovered more than $436 million for the state of Illinois from drug companies that engaged in unfair conduct.”
Second Settlement Between Teva and Illinois
This is the second such settlement with Illinois and Teva Pharmaceuticals in recent years. In March 2014, Teva and subsidiary IVAX LLC agreed to pay the United States and Illinois more than $27.6 million to resolve false billing allegations. That settlement arose out of claims that Teva and IVAX violated the False Claims Act by making payments to a Chicago physician – Dr. Michael J. Reinstein – in return for him prescribing an anti-psychotic medication to thousands of Medicare and Medicaid patients at nursing homes and hospitals.
That settlement involved the promotion of generic clozapine, a rarely used anti-psychotic medication that has serious potential side effects and is generally considered a drug of last resort, particularly for elderly patients. While clozapine has been shown to be effective for treatment-resistant forms of schizophrenia, it is also known to cause numerous side effects, including a potentially deadly decrease in white blood cells, seizures, inflammation of the heart muscle, and increased mortality in elderly patients.
In November 2012, the United States filed a civil False Claims Act lawsuit in U.S. District Court in Chicago against Reinstein, alleging that, since at least August 2003, he schemed to switch his patients to generic clozapine if IVAX agreed to pay him $50,000 under a one-year “consulting agreement” and provide other benefits to him, in violation of the federal Medicare and Medicaid Anti-Kickback statute. Reinstein was the number one prescriber of generic clozapine in the country and received annual renewal of the consulting agreement, travel, meals and entertainment expenses, and tickets to sporting events, continued through at least November 2009. In addition to direct payments to Reinstein, IVAX also provided an all-expenses-paid trip to Miami for Reinstein, his wife, and various employees of Reinstein.
Of the $27.6 million, Illinois received around $12.1 million while the federal government received $15.5 million.