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Firm Pays $11 Million to Settle Medicaid Case

(CN) - Fort Lee, N.J.-based Dava Pharmaceuticals has agreed to pay $11 million to settle charges that it misreported drug prices in order to reduce its Medicaid drug rebate obligations, the Justice Department said.

The settlement resolves allegations that during a four year period, Dava knowingly underpaid rebate obligations under the Medicaid Prescription Drug Rebate Program.

Drug companies participating in the program are required to pay quarterly rebates to state Medicaid programs based, in part, on whether a drug is a "generic" or "branded" product and the difference between what the health care program paid for the drug and prices paid by other purchasers.

Prosecutors said Dava incorrectly treated its version of the drugs cefdinir, clarithromycin and methotrexate as generic drugs rather than branded products, thereby lowering the overall percentage rebate payable to Medicaid. They said Dava further reduced its rebate obligations by incorrectly calculating average manufacturer prices for its versions of the drugs cefdinir, clarithromycin, methotrexate and rheumatrex.

In the end, Dava underpaid drug rebates to the Medicaid program and overcharged certain public health service entities for these products, according to the government.

"Pharmaceutical companies that participate in Medicaid must accurately report drug prices and pay their fair share of rebates to the federal and statement governments," said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. "Settlements like this one help maintain important programs on which so many depend for needed health care."

The federal government's portion of the settlement is approximately $5.7 million. Dava will also pay over $5 million to the Medicaid participating states and approximately $200,000 to certain public health services entities who paid inflated prices for the drugs at issue.

The settlement resolves a lawsuit filed in federal court in the District of Maryland under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens to bring civil actions on behalf of the United States and share in any recovery. Jim Conrad, the whistleblower, will receive 15 percent of the settlement proceeds.

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