Colorado Receives $5 Million in Multistate Suit Over Medicaid Drug Rebates

Colorado will receive $5 million in a multi-state settlement against a drug manufacturer for falsely calculating Medicaid rebates.

Colorado and 48 other states, as well as Washington D.C. and Puerto Rico, have resolved allegations against international pharmaceutical manufacturer Mallinckrodt for the underpayment of Medicaid drug rebates. 

Colorado Attorney General Phil Weiser’s office announced July 6 that Colorado will receive nearly $5 million as part of the settlement, which the Department of Justice first announced in March

In total, the drug manufacturer will pay $233,707,865.18, plus interest, to resolve False Claims Act allegations from a whistleblower lawsuit filed in Massachusetts federal court. Colorado will receive nearly $5 million, of which $2.9 million will go directly to the Colorado Department of Health Care Policy and Financing, with the remaining portion going to the federal government, which partially funds state Medicaid programs. 

The civil action was joined in 2020 by 26 states, the District of Columbia and Puerto Rico, and alleged that between 2013 and 2020, Mallinckrodt knowingly underpaid Medicaid rebates for H.P. Acthar Gel, a drug used to treat chronic inflammation and autoimmune disorders. 

The Medicaid Drug Rebate Program, which was created in 1990 under the Omnibus Budget Reconciliation Act, requires drug manufacturers to pay Medicaid a per-unit rebate price to compensate it if the price of a drug is increased more than the rate of inflation. The rebate amount is calculated by looking at what the price increase would be under the general rate of inflation since 1990 or the year the drug first came to market, whichever date is later. 

H.P. Acthar Gel has been on the market since 1952, but the company and its predecessor, Questcor, began paying rebates in 2013 as though the gel was only recently approved by the U.S. Food and Drug Administration. Under the Medicaid Drug Rebate Program, Mallinckrodt should’ve been calculating its rebate value based on inflation rates since 1990. Instead, the company ignored its pre-2013 price raises, lowering the Medicaid rebate payments on the drug and underpaying Medicaid.

Under the recent settlement agreement, Mallinckrodt admitted Acthar was not a new drug in 2013 and agreed to correct Acthar’s base date average manufacturer price as well as to not change the base date in the future. 

The settlement amount was calculated based on the company’s financial status and received final approval by the U.S. Bankruptcy Court for the District of Delaware on March 2. Mallinckrodt filed for bankruptcy after it was hit with the Medicaid rebate lawsuit as well as opioid-related lawsuits, according to Reuters

“Mallinckrodt illegally reduced the amounts it paid to the state Medicaid program, which poor and vulnerable Coloradans depend on for their medical care,” said AG Weiser in a July 6 announcement. “Our department is committed to maintaining the financial integrity of the Medicaid program and holding accountable those drug companies that try to undermine critical taxpayer-funded health programs.”

The company will pay the federal government an additional $26.3 million to resolve a separate lawsuit which alleged the company knowingly broke the Federal Anti-Kickback Statute by creating a foundation to pay Medicare copay subsidies on Acthar and marketing the drug as free to patients and doctors while increasing the drug price. 

An investigation by CNN in 2018 found that Medicare paid Mallinckrodt $369 million in 2016 after the drug price skyrocketed when the company bought the rights to the drug. According to the investigation, one vial of Acthar in 1990 cost $21 but by 2018, that price increased to $39,000.

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