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Sandoz to Pay $12.64 Million in CMP Settlement with HHS OIG for Misrepresenting Drug Pricing Data to Medicare

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The HHS Office of Inspector General (OIG) announced today that Sandoz Inc. will pay $12.64 million to settle allegations it misrepresented drug pricing data to the Medicare program.

The Sandoz settlement is the largest ever entered into under OIG's drug price reporting civil monetary penalty (CMP) authority.

"The Medicare program relies on drug manufacturers to accurately report pricing information," said OIG Chief Counsel, Gregory E. Demske. "We hope today's settlement reinforces for these companies the importance of taking their drug price reporting responsibilities seriously."

Federal law requires drug makers to report both accurate and timely "Average Sales Price" information to the Centers for Medicare & Medicaid Services (CMS). CMS uses this information to set payment amounts for most drugs covered under Medicare Part B. Inaccurate pricing information can cause Medicare to overpay for these drugs. OIG can seek CMPs against manufacturers that misrepresent, or fail to timely report, drug pricing information.

OIG alleged that, between January 2010 and March 2012, Sandoz misrepresented Average Sales Price data to CMS. "Sandoz's misrepresentations undermined the integrity of the Medicare Part B drug pricing system; we will continue to penalize manufacturers that misrepresent or fail to timely file the required information," Chief Counsel Demske noted.

Sandoz, a division of Novartis Pharmaceuticals and one of the world's largest generic manufacturers, markets hundreds of generic medications in the United States. OIG previously pursued CMPs against Sandoz for late reporting of drug pricing information to CMS. That case was settled in December 2011 with Sandoz paying $230,000.

The settlement includes a certification by the company that it has established a government pricing compliance program. Sandoz has denied liability and no judgment or finding of liability has been made against Sandoz.

Drug manufacturers report several types of drug pricing information to CMS. In addition to determining Medicare Part B payments, pricing data is used to calculate rebates that manufacturers pay to the States in connection with the Medicaid program.

The issue of late or inaccurate reporting of drug pricing information has been a longstanding area of concern for OIG. OIG's Office of Evaluation and Inspections has issued several reports relating to price reporting by manufacturers. In 2010, OIG issued a Special Advisory Bulletin notifying drug manufacturers of the office's intent to pursue CMP actions for failure to meet reporting requirements.

OIG was represented in this matter by Geeta W. Kaveti and Nicole Caucci.

Related Content: Drug Pricing and Reimbursement Portfolio