AstraZeneca and Medco: A Powerful (and Dishonest) Alliance

Following a whistleblower suit, pharmaceutical manufacturer AstraZeneca agreed to pay $7.9 million to resolve claims that stated their engagement in a massive kickback scheme with a distributor, offering remuneration in exchange for inappropriate marketing of their popular drug Nexium. The alleged relationship involved a pharmacy benefit manager formerly known as Medco (now ExpressScripts), who was said to have falsely labeled the medication as being the only one in its class that is eligible for coverage under government healthcare plans, in return for heavily discounted rates on other drugs manufactured by AstraZeneca. This market manipulation also resulted in a suit against the distributor, who paid an additional $7.9 million in a parallel suit.

Pharmacy benefit managers, or PBMs, such as Medco bridge the gap between beneficiaries and manufacturers and are often able to negotiate discounts with drug companies due to the immense purchasing power of their customer base. These discounts are meant to be reflected in the ones they consequently pass down to their customers, but in this case, the money saved was instead pocketed by Medco. In their efforts to obtain the “sole and exclusive” status on Medco’s prescription list, AstraZeneca sweetened the pot by offering reduced rates on various other drugs, including Prilosec, Toprol XL, and Plendil. The nature of this transaction was considered to be a violation of the Anti-Kickback Statute, which prohibits the exchange of anything of value as a means to induce referrals of beneficiaries.

In turn, the ploy led to the submission of numerous fraudulent claims to federal healthcare programs, namely the Retiree Drug Subsidy Program. Because Nexium was in a crowded market, the agreement between the two created the illusion that it was the only drug available for beneficiaries of the program, driving a mass of sales directly to AstraZeneca. In truth, more affordable or medically beneficial drugs were both available and reimbursable under federal healthcare programs. This fact qualified all claims submitted as a result of Nexium’s falsified status as violations of the False Claims Act.

The case was brought to light by two former AstraZeneca employees. Paul DiMattia, who was the executive director of commercial operations, and F. Folger Tuggle, a markets account director in charge of the Medco account, each brought separate evidence against the involved parties, allowing them to file the suit alongside one another under the qui tam provisions of the False Claims Act. In return for the information provided, they collectively received $1,422,000 of the recovered funds from the suit against AstraZeneca; their share from the Medco case has yet to be disclosed. Though neither company accepted liability in their respective settlements, the claims brought against them outline yet another avenue in which pharmaceutical fraud is perpetuated.

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