Aventis: Kaiser Discounts Outside Reported Best Price

In the Aventis private label Medicaid rebate settlement, the company agreed to pay $95.5 million to resolve allegations that it kept Kaiser Permanente discounts out of its reported Best Price. The government alleged that Aventis repackaged its drugs under a new label to avoid millions of dollars in additional Medicaid rebates. The commercial customer got the discount. Medicaid and certain Public Health Service purchasers allegedly lost the savings.

This drug pricing fraud case concerned the steroid-based anti-inflammatory drugs Azmacort, Nasacort and Nasacort AQ. The alleged misreporting by Aventis and its corporate predecessors ran from 1995 to 2000. The Department of Justice announced the civil settlement on May 28, 2009, identifying Aventis Pharmaceutical Inc. as a wholly owned subsidiary of sanofi-aventis U.S. LLC.

Kaiser’s Private Label and the Price Medicaid Never Saw

The alleged arrangement gave Kaiser Permanente a lower price while keeping that price from increasing Aventis’s Medicaid rebate bill. Kaiser was the health maintenance organization buying the private-label drugs. According to the Justice Department, the agreements simply repackaged Aventis’s products under a new label.

Aventis had to report its lowest commercial price and pay quarterly rebates to participating states based on the reported prices.

That is the central issue in Medicaid Best Price fraud. Best Price looks at the lowest qualifying price available from the manufacturer, including prices available to health maintenance organizations. Special packaging, labeling or product identifiers do not, by themselves, take a qualifying sale out of that calculation. Calling the package something different does not change what the buyer paid for the drug.

The economics reach beyond the discounted customer’s own purchases. For a brand drug, the basic Medicaid rebate compares a minimum rebate with the difference between average manufacturer price and Best Price, using the larger amount. When the Best Price calculation controls, a lower qualifying customer price means a larger rebate on Medicaid units. A discount negotiated in a commercial contract can therefore change what the manufacturer owes states elsewhere.

For someone working in contracting or government pricing, that is the recognizable decision inside this case: how the company treated the private-label sale when calculating the number it reported. The government’s allegation was that Aventis used the packaging distinction to leave the discount behind.

Why Public Health Service Purchasers Also Lost Money

The government alleged that the same arrangement underpaid Medicaid rebates and overcharged certain Public Health Service entities. The connection is the price calculation. A manufacturer’s reported numbers can determine both the rebate it owes and the ceiling price an eligible healthcare provider pays.

The 340B ceiling price starts with average manufacturer price and subtracts the Medicaid rebate amount per unit. That makes the rebate part of the purchase-price calculation for providers in the program. If an omitted discount makes the rebate too small, the ceiling is too high.

The direction of the money differs. Medicaid loses money when the manufacturer sends back too little in rebates. A Public Health Service purchaser loses money when it pays too much for the drug. Both consequences can begin with the same commercial discount missing from a price report.

This is why a private-label contract can matter to someone far beyond the sales team that negotiated it. The contract sets the customer’s price. Government pricing determines whether that concession reaches public purchasers through the rebate and ceiling-price calculations. In Aventis’s case, the Justice Department described harm on both sides of that connection.

Where the Settlement Money Went

The settlement covered federal and state Medicaid interests as well as certain Public Health Service purchasers. The Justice Department described approximately $49 million as the federal recovery, over $40 million for participating Medicaid states, and over $6 million for public health services entities that had paid inflated prices for the drugs.

The compliance terms followed the same pricing issue. Sanofi-aventis and the Department of Health and Human Services’ Office of Inspector General added requirements to an existing corporate integrity agreement. The existing agreement came from Aventis’s earlier Anzemet settlement over average wholesale price reporting. The added terms required the company to report certain Best Price information for drugs covered by Medicaid and other health care programs. The Inspector General also said Aventis board members had to personally certify that the company’s compliance program was effective.

That reached above the people preparing the price reports. The settlement paired money for the affected programs and purchasers with reporting obligations and board-level responsibility for compliance.

Sanofi-Aventis as the Whistleblower in the EpiPen Case

Sanofi-Aventis US LLC had a different role in the later Mylan EpiPen case: it was the competitor that brought the whistleblower case. Mylan settled allegations that it treated EpiPen as a generic to reduce Medicaid rebates. That case turned on the drug’s reported category, while Aventis’s case turned on a private-label customer discount.

The Private-Label Pattern Beyond Aventis

Bayer and GlaxoSmithKline faced earlier allegations involving private-label discounts omitted from Medicaid rebate calculations. The Justice Department and HHS report for fiscal year 2003 describes Bayer’s Cipro and Adalat matter and GlaxoSmithKline’s Paxil and Flonase matter. The report describes the two companies selling private-label drugs at discounts to a shared health maintenance organization and allegedly leaving those sales out of Medicaid rebate calculations.

The parallel is the treatment of the transaction. A commercial buyer received a concession, while the manufacturer allegedly calculated Medicaid rebates without including it. A person who knows the private-label contract can see something that the reported price alone does not reveal: which discounted sales were left out.

Public Citizen’s 2018 report, Twenty-Seven Years of Pharmaceutical Industry Criminal and Civil Penalties: 1991 Through 2017, found that overcharging government health programs appeared in more settlements than any other violation category in its review. It also found that most historical settlements in that category concerned falsely elevated average wholesale prices used for reimbursement.

That distinction matters here. A broad drug-pricing settlement total can group together inflated reimbursement benchmarks, hidden discounts and incorrect rebate categories. The Aventis allegation identifies a particular commercial arrangement and the savings Medicaid allegedly missed because of it. That is the level at which an insider’s knowledge becomes useful.

What Evidence Is Needed to Prove Fraud?

In a private-label rebate case, we examine the connections between the customer’s actual deal, the reported Best Price, the rebate shortfall and what the company knew. We work with you to trace the transaction from the commercial agreement into the government pricing calculation, including the decisions that kept a qualifying concession out.

The contract explains the discount and the customer entitled to it. Product and label records connect the private-label sale to the drug being reported. Sales records show the prices behind the calculation. The calculation and submitted report show how the company treated those sales. Those are different parts of the same question: did the government price report carry the deal the company actually made?

The Medicaid rebate process depends on information from different places. Manufacturers report prices, while states report utilization. The price report is certified by a senior officer or someone with delegated authority. An insider who knows why a customer or product was excluded can explain a decision that the final reported number does not disclose.

A contracting employee may know the private-label terms. A product specialist may know how the labels map to the same drug. A government pricing employee may know which sales reached the calculation and which did not. We work with the part you know and connect it to the money the public program should have received.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know the Deal Behind the Reported Price

If you saw a private-label discount disappear from a government pricing calculation, we can help turn what you know into a Medicaid rebate whistleblower case. We stay with you from the contract through the recovery effort and bring in pharmaceutical whistleblower lawyers who understand Medicaid rebates and manufacturer price reporting. Speak with our whistleblower experts about the deal behind the reported price.