SETTLEMENT AGREEMENT This Settlement Agreement ("Agreement") is entered into among the United statesof America, acting through the United States Department of Justice and on behalf of the Of-rice of Inspector General ("OIG-HHS") oft he Department of Health and Human Services ("HHS") (collectively the "United States"), and McKesson Corporation ("McKesson") (hereafter collectively referred to as "the Parties"), through their authorized representatives. RECITALS A. McKesson is a corporation organized under the laws of Delaware with its prineipa! place of business in San Francisco, California. At all relevant times, McKesson was, among other things, a wholesaler of pharmaeeuticais products. B. On or about March 28, 2005, Relator David Morgan ("Relator") filed a qui tam action in the United States District Court for the District of New Jersey Captioned United States ex tel. Morgan v. Express Scripts, Inc., et aL, Civil Actibn No. 05-1714, pursuant to the qul tam provisions of the False Claims Act, 31 U.S.C. § 3730(b) (the "Civil Action"). Relator filed amended complaints on or about May 26, 2006, November 30, 2006, and January 26, 2009. McKesson was named as a defendant only in Relator’s second and third amended complaints. C. The United States contends thatMcKesson caused to be submitted claims for payment to the Medicaid Program (Medicaid), 42 U.S.C. § § 1396-1396w-5. D. The United States contends that it has certain civil claims against McKesson for engaging in the following alleged conduct (hereafter referred to as the "Covered Conduct"): During the period from. August 1, 2001 through March 31, 2005, McKesson knowingly increased, to 25% over Wholesale Acquisition Cost ("WAC") or over Direct Price ("DP"), the markups it reported to First DataBank ("FDB") for all brand name, self-administered,
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SETTLEMENT AGREEMENT - The National Law Journal · 2012-04-26 · agents,, employees, and servants from any claims (including attorney’s fees, costs, and expenses. of every kind
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SETTLEMENT AGREEMENT
This Settlement Agreement ("Agreement") is entered into among the United statesof
America, acting through the United States Department of Justice and on behalf of the Of-rice of
Inspector General ("OIG-HHS") oft he Department of Health and Human Services ("HHS")
(collectively the "United States"), and McKesson Corporation ("McKesson") (hereafter
collectively referred to as "the Parties"), through their authorized representatives.
RECITALS
A. McKesson is a corporation organized under the laws of Delaware with its
prineipa! place of business in San Francisco, California. At all relevant times, McKesson was,
among other things, a wholesaler of pharmaeeuticais products.
B. On or about March 28, 2005, Relator David Morgan ("Relator") filed a qui tam
action in the United States District Court for the District of New Jersey Captioned United States
ex tel. Morgan v. Express Scripts, Inc., et aL, Civil Actibn No. 05-1714, pursuant to the qul tam
provisions of the False Claims Act, 31 U.S.C. § 3730(b) (the "Civil Action"). Relator filed
amended complaints on or about May 26, 2006, November 30, 2006, and January 26, 2009.
McKesson was named as a defendant only in Relator’s second and third amended complaints.
C. The United States contends thatMcKesson caused to be submitted claims for
payment to the Medicaid Program (Medicaid), 42 U.S.C. § § 1396-1396w-5.
D. The United States contends that it has certain civil claims against McKesson for
engaging in the following alleged conduct (hereafter referred to as the "Covered Conduct"):
During the period from. August 1, 2001 through March 31, 2005, McKesson knowingly
increased, to 25% over Wholesale Acquisition Cost ("WAC") or over Direct Price ("DP"), the
markups it reported to First DataBank ("FDB") for all brand name, self-administered,
prescription pharmaceuticals, without regard to the lower markups suggested by drug
manufacturers for such drugs, and knowingly reported such 25% marknps to FDB, when in fact
(1) prices with such marknps did not accurately reflect the prices that McKesson actually
charged its customers for such drugs; (2) McK.esson knew that reporting such false and inflated
markups to FDB would cause FDB to publish false and inflated Average Wholesale Prices
("AWPs") for such drugs; (3) McKesson l~ew that FDB described its published AW-Ps as being
the product of wholesaler surveys and as reflecting actual prices that wholesalers charged their
customers; and (4) McKesson knew that state Medicaid programs would and did use those
published A.WPs to reimburse providers for such drugs. The drugs covered by this Agreement
("the Co~e,ed Drugs") are all brand name, self-administered, prescription pharmaceuticals for
which FDB published AWPs equal to 25% over the drugs’ respective WACs or DPs. The
United States further contends that MeKesson’s conduct caused the United States and states
relying on FDB AWPs, or relying on AWPs published by Medi-Span that were derived from
FDB AWPs, to pay artificially inflated reimbursements for the Covered Drugs for Medicaid
claims submitted during the period from August 1, 2001 through December 31, 2009.
E. This Agreement is neither an admission of liability by McKesson nor a
concession by the United States that its contentions and claims are not well founded. McKesson
expressly denies the contentions of the United States set forth herein and all contentions of
Relator in the Civil Action, and further denies any liability or w~ongdoing related to those
contentions. Neither this Agreement, its execution, nor the performance of any obligations
under it, nor the fact of settlement, is intendedto be an admission of liability or wrongdoing by
McKesson.
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F. To avoid the delay, uncertainty, inconvenience, and expense of protracted
litigation of the above claims, and in consideration of the mutual promises and obligations ofthi,’s
Settlement Agreement, the Parties agree and covenant as follows:
TERMS AND CONDITIONS
1. McKesson shall pay to the United States the sum of $187,000,000 plus simple
interest accrued thereon at a rate of 2.50% per annum from June 22, 2011, to and including the
Effective Date of this Agreement (the "Settlement Amount"). McKesson shall pay the
Settlement Amount to the United States by electronic funds transfer pursuant to written
instructions to be provided by the United States by the Effective Date of this Agreement.
McKesson agrees to make this electronic funds transfer no later than five business days after the
Effective Date of this Agreement.
2. Subject to the exceptions in Paragraph 4 (concerning excluded claims) below, and
conditioned upon McKesson’s full payment of the Settlement Amount, the United States (on
behalf of itself, its officers, agents, agencies, and departmeiats) releases MeKessof~, its current
and former parents, directors, officers and employees, direct and indirect subsidiaries, divisions,
predecessors, and the s~ecessors and assigns of any of them, from any civil or administrative
monetary claim the United States has or may have for the Covered Conduct under the False