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Bayer and Glaxo Settle Medicare Fraud Allegations

The firms agree to pay a total of $344.6 million after allegedly inflating prices for such popular drugs as Cipro, Flonase.

April 17, 2003|Ronald D. White and Roger Vincent | Times Staff Writers

Pharmaceutical giants Bayer and GlaxoSmithKline on Wednesday reached a record-setting Medicare fraud settlement over allegations they overcharged millions of dollars for popular prescription drugs.

Bayer, based in Germany, agreed to pay $257 million to settle allegations that it overcharged Medicare for prescription drugs including Cipro, the popular antibiotic used during the U.S. anthrax scare. A Bayer spokesman said the company did not believe it had done anything illegal. The company set aside $257 million last year to settle the case.

Glaxo, based in Britain, agreed to settle the case for $87.6 million "to avoid delay and expense of a trial," the company said. Glaxo said it still believes it was acting in good faith. The government said that Glaxo overcharged for the antidepressant drug Paxil and Flonase, a nasal spray for allergies.

"These frauds impacted the most vulnerable citizens we have, the elderly and the poor," said Assistant U.S. Atty. Susan Winkler.

The settlement money will be divided among the federal government, states and some public health entities. The states will receive $147.3 million. The California attorney general's office said Wednesday that the state's share could amount to $32.2 million.

The investigation focused on allegations that the two companies hid their lowest prices from Medicaid by repackaging or relabeling their drugs under a middleman's name. The middleman then sold the drug at a deep discount not reported to the government.

By law, the companies are required to pay Medicaid a rebate if they charge anyone less than the government.

The case was initiated by a Bayer executive who sued under the federal False Claims Act, which allows citizens to sue contractors on behalf of the government.

As part of the settlement, heirs of the now deceased whistle-blower, former Bayer marketing executive George Couto, will receive $34 million, according to the family's attorney.

Glaxo shares fell $1.14 to $37.60; while Bayer's stock fell 57 cents to $17.15. Both trade on the New York Stock Exchange.

"The government is sending a message that defrauding and abusing government health programs and their beneficiaries simply will not be tolerated," said Amy Wilken, associate director of the Taxpayers Against Fraud-the False Claims Act Legal Center in Washington.

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Times wire services were used in compiling this report.

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