Dava Pharmaceuticals Defrauds Medicaid of Millions

This past week, Dava Pharmaceuticals Inc. reached an $11 million settlement with the Justice Department over False Claims Act allegations in their Medicaid prescription drug program. The allegations against Dava included underpayment of their rebate obligations under the Medicaid Prescription Drug Rebate program by mislabeling their products. Pharmaceutical companies are required to pay rebates to state Medicaid programs based on whether a drug is “branded” or “generic” and the price difference between what the programs paid for the drug versus other purchasers. In this case, Dava improperly labeled the drugs cefdinir, clarithromycin and methotrexate as generic drugs, which, as a result, reduced the percentage rebate that they were required to pay to Medicaid. The company also incorrectly calculated the average manufacturer prices for these drugs so that they could overcharge public health services. This double-headed fraud was brought to light thanks to the courageous work of the whistleblower Jim Conrad and his attorneys.

As a result of this fraud, not only will Dava have to pay the federal government, but they will also have to render payment to the states that participate in the Medicaid program and to the public health services that bought the drugs. The extent of the fraud reaches across the entire spectrum of intergovernmental relations—state, national, and the private sector. Medicaid as a program is responsible for covering millions of Americans who cannot afford to pay for their medical care alone. Any money that is taken away from the program through these illegal and fraudulent practices will have an effect on those same Americans. Especially in the current economic climate, it is a daily struggle to take care of one’s health. Because Dava is taking advantage of an altruistic government program, they are in turn harming efficacy of the entire system.

This case helps to highlight the tremendous success of the False Claims Act and its implementation in protecting state and national health care programs. For years, private companies have taken advantage of loop-holes within the system, or have just blatantly disregarded the rules in order to produce a better bottom line. With a weapon like the False Claims Act, the government has finally been able to effectively fight back against fraud and crack down on those responsible. While the government needed this new authority to combat fraud, what has really made the difference has been the tireless work of whistleblowers and the qui tam attorneys in the field. Were it not for Mr. Conrad, the Justice Department may not have had a case against Dava.

Going forward, something needs to be done to really deter other pharmaceutical companies from continuing to practice Medicare and Medicaid fraud. The federal False Claims Act has been a boon to the government in recovering public funds, but these companies continue to invest in illicit behavior. In a perfect world, we would not need these enforcements, but because Medicare and Medicaid are continually under assault, we need stronger enforcement procedures than what is currently on the books. More states need to adopt their own False Claims Acts since these companies often commit fraud on a state level. Whistleblower protections need to be strengthened to allow for more people to come forward without fear.

See Also:
http://www.justice.gov/opa/pr/2012/February/12-civ-182.html
http://www.health.ny.gov/health_care/medicaid/

Egan Young, Attorneys-at-Law, represents whistleblowers nationwide. For a free confidential consultation, please call Eric L. Young, Esquire at (215) 367-5151 or email to eyoung@eganyoung.com