CEO of Indian-American pharmaceutical company will have to pay 50 million dollars, know what is the whole matter?
America News Desk!!! A US pharmaceutical company and its Indian-origin chief have agreed to settle allegations that they knowingly underpaid Medicaid rebates for the company’s drug Nitrofurantoin Oral Suspension (Nitro OS). Missouri-based Nostrum Laboratories and its founder and CEO Nirmal Mulay have agreed to pay a minimum of $3,825,000 and a maximum of $50 million to settle those claims.
A Justice Department release Monday said the settlement is based on Nostrum and Mule’s financial condition. Pursuant to the Medicaid Drug Rebate Program, drug manufacturers are required to pay quarterly rebates to state Medicaid programs in exchange for Medicaid coverage of their drugs. The law requires manufacturers to pay inflation-based rebates for drugs, which is designed to protect the Medicaid program from drug price increases that exceed inflation.
“The Medicaid program is a valuable safety net that provides healthcare to some of the most vulnerable Americans,” said Joshua S. Levy, Acting U.S. Attorney for the District of Massachusetts. “By knowingly failing to pay proper rebates to Medicaid, Nostrum used that program to divert resources from those Americans in hopes of turning a profit. “This office will not turn a blind eye to such gross misconduct.”
According to Jody Cohen, Special Agent in Charge of the FBI Boston Field Office, Nostrum reduced the amount it paid to the Medicaid program by incorrectly calculating the rebates payable, even adding $400 to the price of one of their drugs. Even after increasing by more than 100 per cent. As part of the settlement, Nostrum and Mule acknowledged that the former acquired Nitro OS from another manufacturer in December 2015 and continued to market the product in accordance with its pre-existing FDA approval.
In January 2018, Nostrum temporarily ceased manufacturing Nitro OS because the amount of lead in the product did not comply with 2018 FDA guidance. Nostrum resumed manufacturing and marketing Nitro OS in August 2018, after modifying the amounts of two inert ingredients to reduce overall lead levels. Nostrum characterized the relaunched version of Nitro OS as a “rebuild”, but Nostrum did not add or subtract any content and the active content remains unchanged.
Nitro OS also remained in the same dosage form and strength as it was before 2018. Nostrum continues to market this version of Nitro OS under the same FDA approval as the pre-2018 version and says it is legal to do so because no major changes have been made to the drug. After relaunching Nitro OS in August 2018, Nostrum increased its price from $474.75 to $2,392.32 per bottle, triggering significantly higher Medicaid drug rebate invoices from state Medicaid programs due to the inflation-based rebate.
Beginning in the fourth quarter of 2018 through the first quarter of 2020 (when Nostrum withdrew from the Medicaid drug rebate program), Nostrum and Mule did not pay these invoice amounts in full. This was despite knowing that the large discount invoices were linked to price increases and inflation-based discounts and being notified by the Centers for Medicare & Medicaid Services (CMS) that it should pay the higher calculated amount. Instead, and despite prior communications to the FDA that no “major changes” had been made to Nitro OS, Nostrum wrote to CMS arguing that, because this version of Nitro OS is indeed a “new” drug, Nostrum should therefore not pay a discount on the applicable price of the earlier version on this basis.
–IANS
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