Bryan Cohen Sep. 5, 2013, 6:55pm

AUSTIN, Texas (Legal Newsline) - Texas Attorney General Greg Abbott announced Wednesday that the state of Texas and the federal government jointly settled with Major Pharmaceuticals Inc. to resolve allegations of Medicaid fraud.

Major Pharmaceuticals and The Harvard Drug Group LLC allegedly misreported the price of multiple generic drugs to the Medicaid program. As a result, Medicaid was overcharged for certain products manufactured by Major Pharmaceuticals.

Because Medicaid is jointly funded by the state and the federal government, Texas and the federal government will equally share in the $5 million settlement fund. Ven-A-Care of the Florida Keys Inc., a pharmacy that filed a whistleblower lawsuit pursuant to the Texas Medicaid Fraud Prevention Act, is also entitled to a share of the overall recovery.

State and federal law dictates that drug manufacturers must file reports with the Medicaid program disclosing the prices they charge distributors, wholesalers and pharmacies for their products. If a manufacturer falsely reports inflated market prices for their drugs, Medicaid reimburses pharmacies at highly inflated rates. The difference between the actual market price of a drug and the reimbursement amount is called the spread.

Abbott's office alleged Major Pharmaceuticals used unlawfully created spreads to illegally induce pharmacies and other providers to buy the company's products.

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