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Attorney General Ellen F. Rosenblum

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ATTORNEY GENERAL HARDY MYERS SETTLES TWO CASES INVOLVING ALLEGATIONS OF UNLAWFUL PRICING OF PHARMACEUTICALS

June 6, 2008

Attorney General Hardy Myers today announced that the Oregon Department of Justice (DOJ) Medicaid Fraud Unit has finalized two settlements of cases alleging that the Oregon Medicaid Program sustained financial harm due to inappropriate pricing of pharmaceutical products.

As a result of one settlement agreement, Walgreen Company (Walgreens) agrees to pay $61,446.70 in damages and penalties to the Oregon Medicaid Program. The payment is part of a $35 million settlement between the company and the federal government, 42 states and the Commonwealth of Puerto Rico, and resolves claims that Walgreens violated various state and federal statutes and regulations by switching dosage forms of three medications prescribed for Medicaid patients. This practice is alleged to have caused Medicaid programs nationwide to pay higher costs than necessary for certain medications.

"We are diligent in our investigations into allegations that pharmaceutical companies manipulate prices at the harm of state Medicaid programs," stated Myers. "Once again, we have found that prices were inflated to increase their "bottom line" on the backs of the taxpayers."

Myers also announced the addition of certain terms to an existing similar settlement agreement reached with Glaxo Smith Kline (GSK) in which GSK paid the Oregon Medicaid Program $40,436.06 to settle allegations that the company improperly inflated the price paid by the Program for prescriptions of the medication Amoxil.

The Walgreens settlement is the result of a joint federal-state investigation arising from the filing of a whistleblower lawsuit in U.S. District Court in Chicago. The lawsuit alleged that between 2001-2005, Walgreens filled prescriptions for Medicaid recipients by switching dosage forms of ranitidine (generic Zantac); fluoxetine (generic Prozac); and selegiline (generic Eldepryl). The switch, most often from capsule form to tablet or back, was allegedly done regardless of the form of the drug prescribed by the physician, but was implemented to take advantage of higher Medicaid payment rates for various forms of the medications.

The settlement with Walgreens comes on the heels of a similar case in which Omnicare Pharmacy is alleged to have also switched prescription doses with the intent to bill state Medicaid programs at a higher rate. In the Omnicare case, DOJ recovered $29,102 in damages and penalties for the Oregon Medicaid Program. Significantly, the Oregon Medicaid Program had protections in place to limit the impact of such product form switches: data showed Oregon Medicaid probably sustained less than $50,000 in single damages from this conduct by the two companies, and recovered more than twice that amount through the Medicaid Fraud settlements.

In addition to the payment of cash settlements to the state and federal governments, Walgreens agrees to the terms of a Corporate Integrity Agreement (CIA) with the Office of the Inspector General of the United States Department of Health and Human Services. Provisions of the CIA ensure that Walgreens does not switch dosage forms of medications if the result would increase the costs to third-party payers, including state Medicaid programs. The company also agrees to ongoing federal review of its billing practices. Omnicare entered into a CIA with similar provisions.

In 2006, the Medicaid Fraud Unit settled a whistleblower case with GSK resolving allegations that the company manipulated the price for two anti-emetic injectable drugs, causing the Oregon Medicaid Program to overpay by approximately $50,000. As a result of that settlement, the Oregon Medicaid Program recovered $115,858 in damages and penalties and GSK entered into a CIA. As a result of information uncovered following that settlement, the Medicaid Fraud Unit alleged that at the same time GSK was manipulating prices of the anti-emetic drugs, GSK engaged in similar conduct involving Amoxil pricing to Medicaid, with estimated damages to the Oregon Medicaid Program of approximately $20,000. GSK agreed to settle those allegations by entering into an Addendum to the 2006 settlement, and the Oregon Medicaid Program recovered an additional $40,436 in damages and penalties.

These settlements are part of the Medicaid Fraud Unit's continuing efforts to police and pursue the inappropriate billing of pharmaceutical products to the Oregon Medicaid Program. Since January 2003, the unit has returned more than $9.2 million in damages and penalties to the Oregon Medicaid Program from successful resolution of these pharmaceutical pricing cases.

Contact:

Stephanie Soden, (503) 378-6002
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