Attorney General Kamala D. Harris Recovers $23.5 Million in Settlement with McKesson Over Inflated Prescription Drug Prices

SAN FRANCISCO -- Attorney General Kamala D. Harris announced today that California joined 28 other states in a $151 million settlement with one of the nation’s largest drug wholesalers to resolve allegations the company inflated the price of prescription drugs by as much as 25 percent, causing the states’ Medicaid programs to overpay millions of dollars in pharmacy reimbursements.

California’s recovery of the settlement with San Francisco-based McKesson Corporation is $23,585,849.

“In these difficult budget times, it is crucial that California’s scarce public resources support the urgent needs of our state,” said Attorney General Harris. “We cannot allow dollars meant for patients to be diverted to inflate corporate profits.”

Today’s settlement resolves allegations that McKesson Corporation deliberately inflated the Average Wholesale Prices (AWPs) it reported to First Data Bank, a publisher of drug prices, causing California to overpay on branded prescription drugs from August 1, 2001 through December 31, 2009. Medi-Cal sets the reimbursement rates for pharmacies for many of the drugs dispensed to Medi-Cal patients based on the AWP.

The Medicaid program, which is known as Medi-Cal in California, is funded jointly by the federal government and the State of California.

The settlement is based on a 2005 qui tam case filed under the false claims statutes of the federal government, as well as California and other states.  In April 2012, the federal government settled the federal portion of the lawsuit for more than $187 million.

A team of attorneys and investigative auditors from the California Attorney General’s Office and the New York Attorney’s General Office were appointed by the National Association of Medicaid Fraud Control Units to investigate and conduct the settlement negotiations with McKesson on behalf of the participating states.

Joining California and New York in the settlement are the District of Columbia and the following 27 states: Arkansas, Colorado, Delaware, District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Maine, Michigan, Minnesota, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Pennsylvania, South Dakota, Tennessee, Texas, Vermont, Washington, West Virginia and Wyoming.

The Attorney General’s Bureau of Medi-Cal Fraud and Elder Abuse investigates and prosecutes claims of Medi-Cal civil and criminal fraud, as well as allegations of elder abuse, such as physical assaults or financial theft.

A copy of California’s settlement agreement is attached to the online version of this release at http://oag.ca.gov/.