Sandoz Inc. will pay more than $12.6 million for reporting bogus drug prices in order to pump up its Medicare Part B reimbursements. This is the largest civil monetary penalty ever involving such charges, according to the government. The settlement centers on so-called average sales prices (ASP) used to determine payment for drugs covered by Medicare’s outpatient care benefit.
Sandoz, a unit of Novartis AG and a major manufacturer of generics, misstated those prices from early 2010 to early 2012, according to the Office of Inspector General (OIG) at the U.S. Department of Health and Human Services. The OIG said:
Sandoz’s misrepresentations undermined the integrity of the Medicare Part B drug pricing system. We will continue to penalize manufacturers that misrepresent or fail to timely file the required information.
Drugmakers are paid 106 percent of the ASP for drugs covered by a given billing code within Medicare Part B, which shelled out almost $14 billion for medications in 2012. The OIG has increasingly shown interest in scrutinizing the accuracy of those prices, issuing a special bulletin in 2010 that warned Big Pharma of compliance concerns and the potential for enforcement. The inspector general also issued a report in July that found at least one-third of the 200 drugmakers required to submit ASPs for Medicare Part B had failed to do so for at least some of their products. And the inspector general’s annual work plan for the past two years has vowed to look for outliers among the ASPs.
For all that focus, there doesn’t appear to have yet been a huge number of recoveries for alleged ASP violations. Far more money has been recovered for alleged manipulation of so-called average wholesale prices (AWP) by drugmakers accused of exploiting Medicaid. Monday’s payout from Sandoz stems from the inspector general’s authority to levy so-called civil monetary penalties. A settlement agreement between the parties also describes a drug-pricing compliance program that Sandoz has implemented.
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