Colorado getting $3.5 million in drug settlement

Colorado will receive a total of $3.5 million in a settlement with the McKesson Corp., the largest pharmaceutical distributor in North America, for allegations that the company violated both the Federal False Claims Act and Colorado’s own false claim act.

The drug company, which distributes one-third of the medicines used every day, was accused of reporting inflated pricing data for a large number of prescription drugs – causing the state’s Medicaid program to overpay for the medications.

Colorado received $1.6 million to settle its own claims against McKesson, and will receive a portion of the federal government’s share of its claims against the company. The settlement money – all $3.5 million – will go directly to the state’s Medicaid program, and should be paid with interest by today.

“The Colorado Office of the Attorney General will continue to work with other states to insure that taxpayer money is safeguarded, so that state money dedicated to Medicaid will go for the provision of legitimate medical expenses,” said Attorney General John Suthers.

The drug pricing data at issue in this settlement concerns the Average Wholesale Price benchmark used by most states, including Colorado, to set pharmacy reimbursement rates for pharmaceuticals dispensed to Colorado Medicaid beneficiaries. Colorado alleges that McKesson reported inflated AWP pricing data to First Data Bank, a publisher of drug prices, thereby inflating many AWPs that are used by Colorado to set reimbursement. In April, the federal government settled the federal portion of this lawsuit for more than $187 million. This agreement recovers Colorado’s Medicaid share.

The suit was filed in U.S. District Court in New Jersey and joined by 38 states and the District of Columbia. To date, federal and state governments have also recovered more than $2 billion from drug manufacturers that were alleged to have reported inflated pricing information banks that publish drug prices.