Today I was studying prescription pricing for government entities, like my state of California Medicaid program, because I'm not up to date. I happened upon an article that listed drug companies that had overcharged the state. This was the biggest ripoff. I'll highlight some fun points. This is an old case, settled in 2016.
The exorbitant size of the corporate scam, $784 Million bucks, surprised me but I guess it shouldn't.
Here's the agreement to settle to skim through:
STATE SETTLEMENT AGREEMENT
I. PARTIES
'This Settlement Agreement ("Agreement") is entered into between the State of
California ("the State") and Wyeth, Inc., Wyeth LLC and Pfizer, Inc. (collectively,
"Wyeth"), hereinafter collectively referred to as "the Paities:"
II. PREAMBLE
As a preamble to this Agreement, the Paities agree to the following:
A. Wyeth, Inc. was a Delaware corporation with its headquarters at 5 Giralda
Fanns, Madison, New Jersey 07940. Pfizer, Inc. ("Pfizer") is a Delaware corporation
with principal executive offices located at 235 East 42nd Street, New York, New York
10017. On October 15, 2009, Pfizer acquired Wyeth, Inc. and on November 9, 2009,
Wyeth, Inc. converted into. a Delaware limited liability company, Wyeth LLC, which is
now a wholly-owned subsidiary of Pfizer. At all relevant times, Wyeth dis1l'ibuted,
marketed and/or sold phannaceutical products in the United States, including drugs sold
under the trade na111es, Protonix IV and Protonix Oral.
B. On March 21, 2002, William St. John LaCorte filed a qui tam action in the
United States District Co111t for the Eastern District of Louisiana.captioned United States,
et al., ex rel. William St. John LaCorte v. Wyeth, Civ. No. 02-0581 (E.D. La.) (the
"LaCorte Action"). LaCorte' s complaint alleged that Wyeth sold Protonix Oral tablets to
hospitals for as low as $0.16 per tablet, but did not rep01t that price to federal health care
programs. On November 24, 2003, Lauren Kieff filed a qui tam action in the United
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States District Court for the District of Massachusetts captioned United States, et al., ex
rel. Lauren Kieff v. Wyeth Pharmaceuticals, Inc., Civ. No. 03-12366 (D. Mass.) (the
"Kieff Action"). Kieffs complaint alleged that Wyeth bundled sales of Protonix N with
Protonix Oral tablets and reported false prices on those drugs to federal health care
programs. On September 19, 2006, the LaCorte Action was transferred to the District of
Massachusetts, captioned United States, et al., ex rel. William St. John LaCorte v. Wyeth,
Civ. No. 06-cv-11724-DPW (D. Mass.) (collectively, the Kieff Action and the LaCorte
Action shall be referred to as the "Civil Actions"). On August 26, 2008, Kieff and ·
LaCorte filed amended complaints in their respective cases.
C. The United States intervened in both Civil Actions on April 23, 2009, as
to the claims alleging that Wyeth reported false prices, and filed the United States'
Complaint on May 18, 2009. The United States filed an amended complaint on
September 14, 2009, and a Second Amended Complaint on February 11, 2016, adding
Pfizer as a defendant. On June 15, 2009, fifteen States and the District of Columbia
intervened in both Civil Actions, as to the claims alleging that Wyeth reported false
prices. They filed an amended complaint on October 9, 2009. On July 15, 2010,
nineteen States similarly intervened in both Civil Actions; and on September 21, 2010,
another State intervened. In all, thirty five States and the District of Columbia intervened ')
in the Civil Actions.
D. Wyeth has entered into a separate civil settlement agreement (the ''Federal
Settlement Agreement") with the United States of America ( as that term is defined in the
Federal Settlement Agreement) hereinafter referred to as the "United States."·
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E. The State contends that, from the third quarter of 2001 through the fourth
quarter of 2006 (the "Relevant Period"), Wyeth submitted false quarterly statements to
the Centers for Medicare and Medicaid Services ("CMS") of its Best Prices, as defined in
42 U.S.C. § 1396r-8(c)(l)(C), for Protonix Oral tablets and Protonix IV.
F. The State' contends that Wyeth engaged in .the conduct described in this
Paragraph F, which shall constitute the "Covered Conduct." The State further contends
that it has certain civil causes of action against Wyeth for engaging in the Covered
Conduct as a result .of which Wyeth knowingly concealed, avoided or decreased an
obligation to pay Medicaid Drug Rebates to the State Medicaid Program for Protonix
Oral tablets and Protonix IV during the Relevant Period.
(1) During the Relevant Period, Wyeth sold Protonix Oral tablets and
Protonix N to hospitals at discounted prices pursuant to a contract titled
the Protonix Performance Agreement ("PPA"). The PPA created a
bundled sale under the terms of the Medicaid Drug Rebate Agreement by
linking discounts available to participating hospitals for Protonix N to
discounts on Protonix Oral tablets.
(2) Wyeth did not treat sales of Protonix Oral tablets and Protonix N under
the PP A as bundled within the meaning of the Medicaid Drug Rebate
Agreement and therefore did not allocate the discounts available under tl1e
PPA "proportionally to the dollar value of the units of each drug sold
under the bundled arrangement." Medicaid Drug Rebate Agreement,
§ I(d).
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(3) As a result of its failure to treat the PPA as a bundled arrangement, Wyeth
filed false reports of its Best Prices for Protonix Oral tablets and Protonix
IV with CMS thereby causing the Unit Rebate Amount for Protonix Oral
tablets and Protonix IV to be understated during the Relevant Period.
(4) Wyeth thereby concealed, avoided or decreased its obligation to pay
Medicaid Drug Rebates to the State for Protonix Oral tablets and Protonix
IV during the Relevant Period.
To avoid the delay, expense, inconvenience, and uncertainty of protracted
litigation of these causes ofaction, the Pruties mutually desire to reach a full and final
settlement as set forth below.
III. TERMS AND CONDITIONS
NOW, THEREFORE, in reliance on the representations contain.ed herein and in
consideration of the mutual promises, covenants and obligations set forth in this
Agreement, and for good and valuable consideration as stated herein, the Parties agree as
follows:
1. Wyeth agrees to pay to the United States and the Medicaid Pruticipating
States (as defined in sub-paragraph (c) below), collectively, the sum of seven hundred
eighty four million, six hundred thousand dollars ($784,600,000.00), plus accrued interest
on that amount of 1.875% per amium conunencing on May I, 2016 and continuing and
including the day payment is made under this Agreement (collectively, the "Settlement
Amount"), as specified in subparagraphs (a) and (b) below, The Settlement Amount shall
constitute a debt immediately due and owing to the United States and the Medicaid
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Participating States on the Effective Date of the Federal Settlement Agreement, and
subject to the terms ofthis Agreement. The debt shall forever be discharged by payments
to the United States and the Medicaid Pa1ticipating States, under the following terms and
conditions:
(a) Wyeth shall pay to the United States the sum of four hundred thirteen
million, two hundred forty eight thousand, eight hundred twenty dollars
($413,248,820.00) plus accrued interest, if any, on that amount at the rate of 1.875% per
annum commencing on May I, 2016 ("Federal Settlement Amount"). The Federal
Settlement Amount shall be paid pursuant to the terms of the Federal Settlement
Agreement.
. (b) Wyeth shall pay to the Medicaid Participating States the aggregate sum of
three hundred seventy one million, three hundred fifty one thousand, one hundred eighty
dollars ($371,351,180.00), plus accrued interest, if any ("Medicaid State Settlement
Amount"), subject to the non-participating state deduction provision of sub-paragraph (d)
below ("Medicaid Participating State Settlement Amount"), no later than fourteen (14)
, business days after the expiration of the· 30 day opt-in period for Medicaid Participating
States described in sub-paragraph (c) below. The Medicaid Paiticipating State Settlement
Amount shall be paid by electronic funds transfer to the New Y orlc State Attorney
General's National Global Settlement Account pursuant to written instructions from the
State Negotiating Teain ("State Team"), which written insti:uctions shall be delivered to
counsel for Wyeth.
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(c) Wyeth shall execute a State Settlement Agreement with any State that
executes such an Agreement in the form to which Wyeth and the State Team have agreed,
or in a form otherwise agreed to by Wyeth and an individual State. The State shall
constitute a Medicaid Participating State provided this Agreement is fully executed by the
State and delivered to Wyeth's counsel within 30 days of receiving this Agreement. If
this condition is not satisfied within 30 days Wyeth's offer to resolve this matter with the
individual State shall become null and void absent written agreement between counsel for
Wyeth and the State Team to extend the 30 day period.
(d) The total portioi1 of the amount paid by Wyeth in settlement for the
Covered Conduct for the State is $48,600,136.80, consisting of a portion paid to the State
under this Agreement and another portion paid to the United States as pait of the Federal
Settlement Agreement. The amount allocated to the State under this Agreement is the
sum of $30,505,330.08, plus applicable interest, if any (the "State Amount"). If the State
does not execute this Agreement within 30 days of receiving this Settlement Agreement
and that period has not been extended as provided in sub-paragraph (c) above, the State
Amount shall be deducted from the Medicaid State Settlement Amount and shall not be
paid by Wyeth absent written agreement between counsel for Wyeth and the State Team
to extend the time period for executing this Agreement. If Wyeth has paid the Medicaid
Participating State Settlement Amount to the New York State Attorney General's
National Global Settlement Account before the expiration of the 30 day opt-in period, the
New York State Attorney General's Office will return to Wyeth, upon its request, within
a reasonable period of time after the expiration of the 30 day opt-in period and/or any
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agreed-upon extension of that period any State Amount not claimed by virtue of a State's
not executing this Agreement.
2. Upon receipt of the payment described in Paragraph I, above, the State shall
promptly sign and file in the Civil Actions a Joint Stipulation of Dismissal of the Civil
Actions pursuant to Rule 41(a)(l) dismissing with prejudice all claims asserted on behalf
of the State against Wyeth in the Civil Actions. The State agrees to dismiss with
prejudice any state law claims which the State has the authority to dismiss currently
pending against Wyeth in the Civil Actions in State or Federal Courts for the Covered
Conduct Contingent upon the receipt of their respective State Amounts, the State, if
served with the Civil Actions and liable to pay a Relator's share, agrees to pay a Relator's
share in the amount of $4,724,360.47, plus applicable interest. This amount is to be paid
through the State Team and has been addressed via side letters with the Relators in the
Civil Actions.
3. Subject to the exceptions in Paragraph 4 below, in consideration of the
obligations of Wyeth set forth in this Agreement, and conditioned upon receipt by the
State of its share of the Medicaid State Settlement Amount, the State agrees to release
Wyeth, its predecessors and current and former parents, subsidiaries, and successors,
(collectively, the "Wyeth Released Entities"), from any civil cause of action that the State
has for tl1e Covered Conduct.
4. Notwithstanding any term of this Agreement, the State specifically does
not release any person or entity from any of the following liabilities:
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(a) any criminal, civil, or administrative liability arising under state revenue
codes;
(b) any criminal liability not specifically released by this Agreement;
(c) any civil or administrative liability that any person or entity, including any
Released Entities, has or may have to the State or to individual consumers or state
program payors under any statute, regulation or rule not expressly covered by the release
in Paragraph 3 above, including but not limited to, any and all ofthe following claims: (i)
State or federal antitrust violations; (ii) Claims involving unfair and/or deceptive acts and
practices and/or violations of consumer protection laws;
(d) any liability to the State for any conduct other than the Covered Conduct;
(e) any liability which may be asserted on behalf of any other payers or insurers,
including those that are paid by the State's Medicaid program on a capitated basis;
(f) any liability based upon obligations created by this Agreement;
(g) any liability ofindividuals;
(h) except as explicitly stated in this Agreement, any administrative liability,
including mandatory exclusions from the State's Medicaid program;
(i) any liability for expressed or implied warranty claims or other claims for
defective or deficient P):'Oducts and services provided by Wyeth;
G) any liability for personal injury or property damage or for other consequential
damages arising from the Covered Conduct; or
(k) any liability based on a failure to deliver goods or services due.
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5. Wyeth waives and shall not assert any defenses it may have to criminal
prosecution or administrative action for the Covered Conduct, which defenses may be
based in whole or in part on a contention, under the Double Jeopardy Clause of the Fifth
Amendment of the Constitution or the Excessive Fines Clause of the Eighth Amendment
of the Constitution, that this Agreement bars a remedy sought in such criminal
prosecution or administrative action.
6, In consideration of the obligations of the State set forth in this Agreement,
Wyeth waives and discharges the State, its agencies, employees, and agents from any
causes of action (including. attorneys' fees, costs, and expenses of every kind and
however denominated) which Wyeth has against the State, its agencies, employees, and
agents arising from the State's investigation and prosecution of the Covered Conduct.
7. The amount that Wyeth must pay to the State pursuant to Section III,
Paragraph 1 above, will not be decreased as a result of the denial of any claims for
payment now being withheld from payment by the State's Medicaid program, or any
other state payor, for the Covered Conduct; and Wyeth agrees riot to resubmit to the
State's Medicaid program or any other state payor, any previously denied claims, which
denials were based on the Covered Conduct, and agrees to withdraw the appeal of or not
to appeal or cause the appeal of any such denials of claims.
8. Wyeth shall not seek payment for any claims for reimbursement to the
State's Medicaid Program covered by this Agreement from any health care· beneficiaries
or their parents, sponsors, legally responsible individuals, or third party payors.
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9. Wyeth expressly warrants that it has reviewed its financial condition and
that it is currently solvent. within the meaning of 11 U.S.C. §§ 547(b)(3) and
548(a)(l)(B)(ii)(I), and shall remain solvent following payment of the Settlement
Amount and compliance with this Agreement.
10. The Parties each represent that this Agreement is freely and voluntarily
entered into without any degree of duress or compulsion whatsoever.
11. Wyeth agrees to cooperate fully and truthfully with any State investigation
relating to the Covered Conduct of individuals or entities not released in this Agreement.
Upon reasonable notice, Wyeth shall facilitate, and agrees not to impair, the cooperation
of its directors, pfficers, employees or agents, for interviews and testimony, consistent
with the rights and privileges of such individuals and of Wyeth. Upon request, Wyeth
agrees to furnish· to the State complete and unredacted copies of all non-privileged
documents including, but not limited to, reports, memoranda of interviews, and records in
their possession, custody or control, concerning the Covered Conduct. Wyeth shall be
responsible for all costs it may incur in complying with this paragraph.
12. Except as expressly provided to the contrary in this Agreement, each Party
to this Agreement shall bear its own legal and other costs incurred in co1J1Jection with this
matter, including the preparation and performance of this Agreement.
13. Except as otherwise stated in this Agreement, this Agreement is intended
to be for the benefit of the Parties only, and by this instrument the Parties do not release
any liability against any other person or entity.
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14. Nothing in this Agreement constitutes an agreement· by the State
concerning the characterization of the amounts paid hereunder for pmposes of the State's
revenue code.
15. In addition to all other payments and responsibilities under this
Agreement, Wyeth agrees to pay all reasonable expenses and travel costs of the State
Team, inpluding reasonable consultant fees and expenses. Wyeth will pay this amount by
separate check made payable to the National Association of Medicaid Fraud Control
Units, after the Medicaid Participating States execute their respective Agreements, or as
otherwise agreed by the Parties.
16. This Agreement is governed by the laws of the State, and venue for
addressing and resolving any and all disputes relating to this Agreement shall be the state
courts of appropriate jurisdiction of the State.
17. The undersigned Wyeth signatories represent and warrant that they are
authorized as a result of appropriate corporate action to execute this Agreement. The
undersigned State signatories represent that they are signing this Agreement in their
official capacities and that they are authorized to execute this Agreement on behalf of the
State through their respective agencies and departments.
18. The Effective Date of this Agreement shall be the date of signature of the
last signatory to this Agreement. Facsimiles and electronic transmissions of signatures
shall constitute acceptable, binding signatures for purposes of this Agreement.
19. This Agreement shall be binding on all successors, transferees, heirs, and
assigns of the Paities.
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20. This Agreement constitutes the complete agreement between the Parties
with respect to this matter and shall not be amended except by written consent of the
Parties.
21. This Agreement may be executed in counterparts, each of which shall
constitute an original, and all of which shall constitute one and the same Agreement.
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T .. -.--. ------··--·--·•••,-. . .... •
STATE OF CALIFOJRNIA
By: Date: Rari Glaser Deputy Attorney General Bureau of Medi-Cal Fraud and Elder Abuse California Department of Justice 1455 FrazeeR Suite315
San Diego, CA 92108
By: Date: _S"/_2-&/__\ tp:._ ._ Jennifer
Dirooto
Califo Department of Healtlt Care Services
1501 Capitol A venue, Suite 71.6001 · MS0003 Sacramento, CA 95814
,, ,, ••
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By:
Y\'YEIH
By:
· Carlton Wessel
£ Senior Vice President
£ Associate General Counsel
£ Pfizer Inc.
£
Original Signed by l / '? / /Y ""'·-··-"""·:;.""'.,._-.._,''+J-__,,,\._-J ..;...:S.-'---===------- Dated: 1...c . . 1 Brien T. O'Connor
Ropes & Gray LLP
800 Boylston Street
Boston, MA 02199-3600
Counsel to Wyeth, Inc., Wyeth LLC and Pfizer, Inc.
WyethCase # 09-06-04
Page 14
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