Opinion ID: 2743752
Heading Depth: 3
Heading Rank: 2

Heading: Medicaid and Related Statutory Framework

Text: Under the Medicaid Drug Rebate Program, a participating drug manufacturer agrees to pay rebates to state Medicaid programs in exchange for those programs covering the cost of a manufacturer’s drugs. See Omnibus Reconciliation Act of 1990, Pub. L. No. 101-508, § 4401, 104 Stat. 1388 (1990) (codified as amended at 42 U.S.C. § 1396r- 8 (2012)); see also Astra USA, Inc. v. Santa Clara Cnty, 131 S. Ct. 1342, 1345-46 (2011). The Department of Health and Human Services (HHS) determines the amount of the rebate using a statutory formula based on a manufacturer’s average and best prices for a particular drug. See, e.g., 42 U.S.C. § 1396r-8(c). Each manufacturer calculates these prices— which is “a complex enterprise requiring recourse to detailed information about the company’s sales and pricing,” Astra, 131 S. Ct. at 1346 (citing 42 U.S.C. § 1396r–8(k); 42 C.F.R. §§ 447.500–520) (2010)2—and submits them to HHS each quarter, 42 U.S.C. § 1396r–8(b)(3). HHS may not disclose a manufacturer’s reported prices except in certain circumstances. Astra, 131 S. Ct. at 1346 (citing 42 U.S.C. § 1396r-8(b)(3)(D) (2010)). 2 Subject to certain exceptions, the reported best price is “the lowest price available from the manufacturer during the rebate period to any wholesaler, retailer, provider, health maintenance organization, nonprofit entity, or governmental entity within the United States.” 42 U.S.C. § 1369r- 8(c)(1)(C)(i). Among other things, the best price must account for certain cash discounts, free goods, volume discounts, and rebates. Id. § 1396r-8(c)(1)(C)(ii). 7 Pertinent here, a drug maker participating in Medicaid must also comply with Section 340B of the Public Health Service Act, 42 U.S.C. § 256b(a). That section prohibits a manufacturer from charging certain state-operated programs that receive federal funds more than the average price for its drugs, as defined by the Medicaid Drug Rebate Program, less a specified rebate percentage. See Astra, 131 S. Ct. at 1346. In addition, the federal anti-kickback statute (AKS) prohibits a drug maker from knowingly offering any remuneration to induce others to cause the government to pay for its drugs. Medicare and Medicaid Patient Protection Act, Pub. L. No. 92-603, 86 Stat. 1419, 1454 (codified at 42 U.S.C. § 1320a7b(b)) (1972).3 At all relevant times, BMS participated in Medicaid’s Drug Rebate Program with regard to its anticoagulant Coumadin, and AZ participated in the program with regard to its proton pump inhibitors (PPIs) Nexium and Prilosec. Both companies also participated in the Section 340B program with those drugs, and sold those drugs to government health care programs. Therefore, the companies were prohibited from, and subject to liability under the FCA for, misreporting their average and best prices for those drugs, over-charging or under-rebating the government based on those prices, and improperly inducing others to cause the government to pay for their drugs. See, e.g., United States ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 311-13 & n.19 (3d Cir. 2011) (finding FCA claim properly pleaded where plaintiff alleged defendant’s claim for payment was false due 3 Congress’s 2010 amendment of the AKS, see PPACA § 6402(f), 124 Stat. at 759, also does not apply retroactively here. See Graham Cnty., 559 U.S. at 283 n.1. 8 to a violation of the pre-PPACA AKS); Hutchins v. Wilentz, Goldman & Spitzer, 253 F.3d 176, 182-83 (3d Cir. 2001) (noting FCA liability attaches to conduct that causes or would cause government economic loss).