Dava Pharmaceuticals Inc. has agreed to settle claims that it violated the False Claims Act. Dava Pharmaceuticals will pay the U.S. government $11 million to resolve claims that it misreported important information about its drugs in order to minimize its obligations to reimburse Medicaid under the Medicaid Drug Rebate Program.
The Medicaid Drug Rebate Program requires drug companies to pay quarterly rebates to state Medicaid programs. The amount of these rebates is based, in part, on the difference between what the Medicaid program paid for the drug and the prices paid by other customers and on whether the drug is “generic” or “branded.”
Between 2005 and 2009, Dava Pharmaceuticals sought to avoid its full obligations under the Medicaid Drug Rebate Program in two different ways: by mischaracterizing its drugs and by miscalculating the average customer prices paid for its drugs. First, by misdesignating its version of cefdinir, methotrexate, and clarithromycin as “generic” drugs instead of as “branded” drugs, Dava Pharmaceuticals improperly lowered the percentage rebate it paid Medicaid. Second, Dava Pharmaceuticals misreported the average prices paid by commercial customers for the same three drugs as well as rheumatrex, further lowering the amount it paid in rebates during these years. These types of fraudulent activities are called “best price violations.”