State Receives $1.3 Million Settlement With Aventis Pharmaceuticals Inc. Over “Best Price” Violations

TRENTON –New Jersey has received $1.3 million in a settlement with Aventis Pharmaceuticals Inc. regarding “best price” violations and resulting losses to New Jersey’s Pharmaceutical Assistance to the Aged and Disabled (PAAD) and Senior Gold (SG) Pharmaceutical Assistance programs, Attorney General Paula T. Dow and Criminal Justice Director Stephen J. Taylor announced yesterday.

According to Acting Insurance Fraud Prosecutor Riza Dagli, the $1.3 million recovery for New Jersey stems from the same allegations that led to a separate settlement late last year involving the Medicaid program, in which New Jersey received $1,043,141 from Aventis.  The Medicaid settlement resolved allegations that between 1995 and 2000 Aventis and its corporate predecessors knowingly misrepresented “best price” information for the anti-inflammatory nasal sprays Azmacort, Nascort and Nascort AQ.


New Jersey and certain other states that were part of that Medicaid settlement pursued additional recoveries related to state-funded pharmaceutical assistance programs that were affected by the “best price” violations.  That resulted in New Jersey receiving the new payment of $1,303,157 this week for the PAAD and SG programs.  Of that amount, $1,120,715 will go to the PAAD program and $182,442 will go to the SG program.

“We are committed to rooting out Medicaid fraud and fraud involving our state-funded pharmaceutical assistance programs,” said Dow. “Every dollar that is lost to fraud is one less dollar available to purchase prescription medications for needy individuals.”

Under the Medicaid Drug Rebate statute, Aventis was required to report to Medicaid the lowest, or “best price” that it charged commercial customers and pay quarterly rebates to the Medicaid program based on those reported “best prices.”  State regulations require that pharmaceutical manufacturers enter into the same rebate agreement with the state in order to participate in the PAAD and SG programs.  The PAAD and SG programs are funded entirely through state funds, while Medicaid is jointly funded by the state and federal government.

The “best price” violations involved Aventis entering into a “private label” agreement with Kaiser Permante, a large health maintenance organization.  Aventis repackaged its drugs under Kaiser’s private label, and thereby avoided reporting the lower price offered to Kaiser in its best price calculation for Azmacort, Nascort and Nascort AQ.  This failure of reporting the private label prices caused the Center for Medicare and Medicaid Services to overestimate Aventis’ “best price” on the three drugs, resulting in the underpayment of drug rebates to the Medicaid program and state-funded pharmaceutical assistance programs.

This settlement arose from False Claims Act actions that were consolidated in the U.S. District Court for the District of Massachusetts.  These cases, called qui tam cases, were filed by private parties on behalf of the government.

Dow noted that many cases now being filed alleging Medicaid fraud are filed under the New Jersey False Claims Act.  She explained that the New Jersey False Claims Act, like the federal False Claims Act, contains a whistle blower provision to provide rewards to people who blow the whistle on fraud.

New Jersey administers the Medicaid program through the Division of Medical Assistance and Health Services and the Department of Human Services.  It administers the PAAD and SG programs through the Department of Health and Senior Services.  The Medicaid Fraud Control Unit in the Division of Criminal Justice investigates both criminal and civil Medicaid fraud and fraud against other state-funded health care programs.

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