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12.

Congress set up the Medicaid rebate program to reduce the cost of drugs to the

states' Medicaid Programs. Participating pharmaceutical manufacturers are required by law to

give the government a rebate on all drugs paid for by Medicaid. The "best price" is a key

component of the formula manufacturers use to calculate this rebate (known as the "Medicaid

Rebate").

13.

The

result

of the

kickbacks-for-switches

scheme

was

that

Defendant

Manufacturers were actually giving Omnicare a far better net price on its "preferred" medication

than it gave any other entity - after the kickbacks were subtracted. This net price was Defendant

Manufacturers' true "best price." Defendant Manufacturers did not disclose this actual best price

to the government. As a result, Defendant Manufacturers' Medicaid rebates were grossly

understated.

14.

Defendant Manufacturers' failure to report actual best pnce resulted in other

submissions of false claims to the government. Defendant Manufacturers use their reported best

price to calculate not only Medicaid rebates; best price also forms the basis of pricing for

medications for federally funded "Public Health Service" or "PHS" or "Section 340b" entities -

black lung clinics, state-operated AIDS drug purchasing assistance programs, hemophilia

diagnostic treatment centers, urban Indian organizations, and disproportionate share programs,

among others.

15.

The reported best price calculations also set the price Defendant Manufacturers

charge the Federal Supply Schedule ("FSS") - prices charged to the Department of Defense, the

Veterans' Administration, the Bureau of Prisons, and Bureau ofIndian Affairs.

16.

Using an artificially high best price made the prices on every invoice paid for

Defendant Manufacturers' pharmaceuticals by 340b or FSS entities fraudulently high - the

4

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