Schering-Plough: Hidden Best Prices and Prescriber Payments

The Schering-Plough 2006 best price settlement included more than $203 million in civil Medicaid damages and penalties over allegations of concealed discounts and prescriber kickbacks. The drugmaker had already resolved a separate Claritin rebate case in 2004.

The New Jersey Attorney General announced the resolution on August 29, 2006. The government alleged that Schering-Plough concealed lower prices for Claritin, K-Dur and Temodar from Medicaid and paid prescriber kickbacks involving Intron-A, PEG-Intron and Rebetron.

The allegations reached different decisions inside the business: the prices disclosed to the government and the payments intended to influence prescribing. Someone in government pricing might see the missing concession. Someone in sales might know what a payment was meant to buy.

How Hidden Best Prices Reduce Medicaid Rebates

The Schering-Plough Medicaid best price allegations concerned lower prices allegedly concealed from the program. Best Price is the lowest qualifying price a manufacturer makes available to specified purchasers. It feeds the Medicaid drug rebate calculation, so a concession to a commercial customer can change what the manufacturer owes Medicaid.

Manufacturers report the prices used to calculate their Medicaid rebates. A lower Best Price can mean a larger rebate owed to Medicaid. Hiding that lower price can leave Medicaid with a smaller rebate even though the commercial customer gets the discount.

That is why the customer agreement matters as much as the price report. Cash discounts, volume discounts, rebates and free goods tied to a purchase can affect Best Price. A government-pricing employee needs the concessions behind the sale to calculate the number. If a discount disappears between the commercial agreement and the government report, the favorable deal stays with the customer while taxpayers lose the rebate it should produce.

The industry distinction is between a published price and what the buyer actually gets. In its 2020 paper The Association Between Drug Rebates and List Prices, the USC Schaeffer Center found that increases in estimated rebates were associated with increases in list prices. The finding explains why a rising list price can coexist with a more generous deal underneath it. For a best-price case, the revealing detail is the particular customer’s concession and whether the manufacturer included it in its report.

What Is a Pharmaceutical Kickback?

A pharmaceutical kickback is money or another benefit offered to influence prescribing or other business paid for by a federal health care program. In Schering-Plough’s resolution, the government alleged prescriber kickbacks involving Intron-A, PEG-Intron and Rebetron.

For a sales or marketing employee, the important connection is between the recipient, the reason for the payment and the prescriptions the company wanted. For the government-payment side, it is the connection to the claims that followed. The pharmacy or healthcare provider sends the bill, but the drug company can be responsible for the payment that prompted the prescription.

When the Budget Comes Before the Work

A later case against Biogen shows how an insider can explain that connection. The company reached a civil settlement in 2022 over alleged payments to induce prescriptions. A former employee’s complaint described a consulting program in which the decision to pay doctors allegedly came before anyone had decided what advice to seek:

The alleged order of decisions is the point. The budget bought access to prescribers, and the meeting topic supplied a reason to pay them. An employee who knows how the budget was approved can explain something an invoice labeled consulting cannot. This is the question behind payments for a doctor’s advice: what work did the company want, and what business did it expect in return?

The Separate Claritin Rebate Case in 2004

Schering-Plough’s 2004 Claritin rebate case involved allegations that it disguised discounts to managed-care customers. The Justice Department announced that earlier resolution on July 30, 2004, including a $292,969,482 civil settlement. Cigna and PacifiCare were the named managed-care counterparties. The civil payment covered the United States, state Medicaid programs and Public Health Service entities.

The government alleged that Schering-Plough disguised Claritin discounts as data fees, deeply discounted products, services, risk-sharing arrangements and prepaid rebates. Calling a discount a data fee changes the label, not the benefit to the customer. Under the government’s allegations, the customer kept that benefit while Medicaid lost the rebate it was owed.

Managed-care customers such as Cigna and PacifiCare sit on the buying side of these arrangements. In that market, manufacturer rebates can purchase formulary access, preferred placement, utilization terms or volume. The rebate report must account for the qualifying price concessions that bargain creates. That is where knowledge of the deal becomes useful to a Medicaid pricing case.

The alleged concealment in the Claritin case worked through the labels attached to commercial benefits. That makes the agreement, the payment and the pricing treatment parts of the same story. The person negotiating the deal and the person preparing the Medicaid report may see different descriptions of the same economic benefit.

Former employees of ITG, Inc. brought the whistleblower claims behind the earlier resolution. Their collective award was about $31.7 million from that civil recovery. Their role illustrates the value of someone who can explain the commercial arrangement behind the reported price.

What Evidence Is Needed to Prove Fraud?

For a concealed-price allegation, the useful evidence connects the customer’s actual deal to the manufacturer’s price calculation and the rebate owed. For a prescriber-payment allegation, it connects the benefit to the business sought and the government claims. We work with pharmaceutical whistleblowers who can explain those connections from inside the transactions.

In a pricing matter, that can mean the contract language, credits, payments and calculation that show how a concession was treated. In a prescriber-payment matter, it can mean the budget decision, the promised work and communications explaining why that physician was selected. The earlier Claritin allegations and the Biogen complaint show why the description on an invoice may tell only part of the story.

The commercial purpose matters alongside the accounting treatment. Someone who approved a deal may know why the company offered the benefit. Someone who calculated the rebate may know whether that benefit reached the report. Our work is to connect that business knowledge to the money the government paid or should have received.

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

You Know What the Payment Bought

If you saw a customer concession disappear from a Medicaid calculation or a prescriber payment approved for the business it would bring, speak with our whistleblower experts about what the company paid for and what it reported. We build your strongest pharmaceutical whistleblower case with you, find pharmaceutical whistleblower lawyers who understand rebate reporting and prescriber-payment arrangements, and stay beside you through the pursuit of a recovery.