B. Braun Medical: Reported Prices for 49 Drug Products

B. Braun Medical Inc. agreed to pay $14,744,000 in the B. Braun AWP settlement over allegations that it caused Medicaid to overpay for 49 drug products. The government’s account puts the sales incentive inside the reimbursement system: sell a drug at one price, report a higher price, and let the customer collect the inflated payment. For someone working in pricing, sales or pharmacy purchasing, that is the revealing part of the allegation. The customer’s profit allegedly helped sell the manufacturer’s product, and taxpayers supplied the money.

The Justice Department announced the civil settlement on December 7, 2010. It identified B. Braun Medical as the U.S. subsidiary of German pharmaceutical company B. Braun Melsungen AG. This pharmaceutical fraud case concerned the reported prices of infusion fluids, nutritional solutions and other intravenous drugs.

How B. Braun Allegedly Marketed the Spread

The alleged average wholesale price fraud turned the gap between a customer’s purchase price and government reimbursement into a sales tool. The spread was the difference between what the provider paid for a drug and what the government paid the provider. A larger spread meant more money for the provider or pharmacist.

In its shared account of the settlements with B. Braun, Abbott and Roxane, the Justice Department alleged that the companies reported prices far above their actual sales prices, knowing that federal healthcare programs relied on those reports. The government said the companies deliberately created inflated spreads to attract existing and potential customers. The government said Medicare and Medicaid then paid claims based on the inflated numbers.

A manufacturer could make its product more attractive by increasing what the buyer expected to collect from the government. The customer saw the purchase price and the reimbursement opportunity together. The government paid from the reported price. According to the Justice Department, the companies used that separation to sell drugs at taxpayers’ expense.

The Infusion Products Behind the Allegations

B. Braun’s part of the settlement concerned Medicaid payments for products used in intravenous care. The government’s description included water-based solutions that facilitate the infusion of other drugs or replace fluids: dextrose solutions, sodium chloride solutions, sterile water and lactated ringers solution. It also included intravenously administered nutritional solutions and other intravenous drugs.

The alleged sales incentive reached the fluids used to deliver treatment, as well as drugs administered intravenously. Someone purchasing those solutions could know the actual cost without ever working for the manufacturer that supplied the reported price. That is why the purchasing side of the business matters to this case.

The Home-Infusion Company Behind the Qui Tam Cases

A Florida home-infusion company and its principals brought the False Claims Act qui tam cases behind the announced settlements. The whistleblower business worked in the same kind of care in which B. Braun’s products were used. A purchaser could compare what it paid for a drug with the reimbursement tied to the published price. This case shows why pharmaceutical whistleblowers can come from outside the manufacturer.

The department announced a collective whistleblower award of approximately $88.4 million for the whistleblowers across the B. Braun, Abbott and Roxane settlements together. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

Separate Settlements for a Shared Pricing Practice

B. Braun’s agreement resolved its own alleged Medicaid overcharges within a shared announcement. Abbott and Roxane had separate settlements, and the same pattern appeared in a separate respiratory-drug case against Dey. Dey agreed to pay $280 million over allegations that it reported inflated drug prices and used the resulting reimbursement advantage to induce purchases.

The same home-infusion whistleblower also brought the Dey case. The companies sold different products, but the alleged inducement depended on the same separation between actual cost and government payment.

How Is AWP Calculated?

Historically, average wholesale price came from a markup over wholesale acquisition cost. As the federal court explained in its 2007 AWP opinion, standard markups stopped reflecting actual wholesaler margins as competition and consolidation changed the business. Manufacturers reported AWPs to pricing publications, and government programs used those published numbers to set reimbursement. The publications stood between the manufacturer’s report and the public program’s payment. Yet those numbers bore little relationship to actual purchase prices.

The pricing benchmark and the transaction price were different things. That distinction explains how the conduct alleged against B. Braun could work: the number entering the reimbursement system could remain high while the customer bought the product for much less.

Public Citizen’s Health Research Group examined the broader pattern in its 2010 report, Rapidly Increasing Criminal and Civil Monetary Penalties Against the Pharmaceutical Industry: 1991 to 2010. It found that overcharging government health care programs, mainly Medicaid, accounted for the largest number of state settlements in its study. Its description of the payment gap was blunt:

That finding describes the wider AWP problem: public programs paid for a markup that bore little relationship to what the drug actually cost.

What Pricing Insiders Can See

Price submissions, actual sales prices, reimbursement information and sales instructions connect the reported number to the reason a customer bought the product. A separate government complaint against Professional Compounding Centers of America shows that connection in compounding ingredient pricing. The government alleged that management made the spread part of the sales team’s pitch:

The price report shows what the company told the reimbursement system. The customer transaction shows what the product actually cost. The sales message can show why the company wanted the gap. Our whistleblower experts work with you to connect those decisions to the government payments they affected.

You Know the Price Behind the Pitch

If you saw a reported drug price used to sell customers on government reimbursement, speak to one of our whistleblower experts about that sales pitch. We build the case with you and bring in pharmaceutical pricing whistleblower lawyers who understand how the reported number reaches the paid claim. We stay beside you, putting your knowledge of the business to work in your strongest pharmaceutical pricing whistleblower case.