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Indian-origin CEO to pay $50 million for violating False Claims Act
Under the Medicaid Drug Rebate Program, pharmaceutical manufacturers are obligated to provide quarterly rebates to state Medicaid programs.
Nostrum Laboratories Inc. (Nostrum), founded by Indian American Nirmal Mulye, has agreed to pay a minimum of $3,825,000 and up to $50 million to settle allegations of False Claims Act violations related to the company's alleged underpayment of Medicaid rebates for its drug Nitrofurantoin Oral Suspension (Nitro OS).
Under the Medicaid Drug Rebate Program, pharmaceutical manufacturers are obligated to provide quarterly rebates to state Medicaid programs in return for the inclusion of their drugs in Medicaid coverage. The program's regulations mandate that manufacturers pay rebates based on inflation rates for their drugs. This mechanism is designed to protect the Medicaid program from bearing the burden of drug price increases exceeding the rate of inflation.
As part of the settlement, Nostrum and Mulye admitted, among other things, that in December 2015, Nostrum purchased Nitro OS from another manufacturer and continued marketing the product based on the product's preexisting FDA approval, and that in January 2018, Nostrum temporarily halted production of Nitro OS due to the product's lead content not aligning with the revised 2018 FDA guidance.
“Nostrum Laboratories reduced the amount that it paid to the Medicaid program by improperly calculating the rebates it owed, even after hiking the cost of one of their drugs by over 400%,” said Special Agent in Charge Jodi Cohen of the FBI Boston Field Office. “Today’s settlement is a win for taxpayers by ensuring that this pharmaceutical company cannot boost its bottom line at the expense of the Medicaid program and the vulnerable population it serves.”
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