King Pharmaceuticals to Pay $124 Million to Settle False Claims Act Charge
19 Corporate Crime Reporter 43(3), November 1, 2005

King Pharmaceuticals will pay $124 million plus interest to settle federal charges that it underpaid rebates owed under the Medicaid program and overcharged various federal and state governmental entities for its drug products.

The Medicaid rebate program ensures that Medicaid receives the lowest price available in the marketplace for the program's reimbursed drugs.

Federal officials alleged that from 1994 through 2002, the company failed to report accurately the average manufacturer price and best price for its Medicaid-reimbursed drugs.

These prices are used to calculate a quarterly rebate payment that each participating manufacturer must make to each state Medicaid program.

The federal officials was triggered after a King employee filed a False Claims Act lawsuit.

Edward Bogart, formerly director of contracts and national accounts for King, also brought claims under similar false claims statutes of 13 states and the District of Columbia.

The Justice Department said that it had not reached an agreement with Bogart as to his share of the proceeds.

"There is nothing inherently wrong providing large rebates to pharmacy benefit managers, but a legitimate business tool was turned in this case into a mechanism to abuse the Medicaid laws," said Bogart's attorney, Joel Androphy. "The courageous actions of Ed Bogart exposed serious false claims violations and ensured that the U.S. treasury and taxpayers were saved tens of millions of dollars. He became a whistleblower only after his efforts to report the illicit activity within the company were rejected by top management and attempts were made to discredit him personally and professionally."

"This ordeal has been extremely difficult for me and for my family," Bogart said in a statement release by his attorneys. "I took these concerns to King with the best of intentions, and they responded by excluding me from meetings and my responsibilities. I soon ended up with a storage room with mold and leaky ceilings as an office. But I'm not a person who buckles easily, given my military background and my personality. The way they treated me -- simply for asking that the company to conduct business in a legal and ethical manner -- was astonishingly disappointing and troubling."

Patrick Meehan, the U.S. Attorney in Philadelphia, said that “unlike prior settlements, which involved the misreporting of prices relating to a specific transaction or drug, this settlement is unique because King agreed to redo its pricing on its entire product line over a period of several years.”



Corporate Crime Reporter
1209 National Press Bldg.
Washington, D.C. 20045