Dava Pharmaceuticals Pays $11 Million to Settle False Claims Act Allegations

The company underpaid drug rebates to Medicaid and overcharged certain public health service entities for some of its products.

Between Oct. 1, 2005 and Sept. 30, 2009, Dava Pharmaceuticals Inc. knowingly underpaid their rebate obligations under the Medicaid Prescription Drug Rebate Program, according to allegations by the Justice Department. Under the rebate program participating drug companies are required to pay quarterly rebates to state Medicaid programs based, in part, on whether a drug is a "generic" or "branded" product and the difference between what the health care program paid for the drug and prices paid by other purchasers.

Dava as agreed to pay the United States $11 million to settle allegations that it violated the False Claims Act by misreporting drug prices in order to reduce its Medicaid Drug Rebate obligations, the Justice Department announced on Feb. 9.

In order to reduce its Medicaid rebate obligation, Dava incorrectly treated its version of the drugs cefdinir, clarithromycin and methotrexate as "generic" drugs rather than "branded" products, thereby lowering the overall percentage rebate payable to Medicaid. In addition, Dava further reduced its Medicaid rebate obligations by incorrectly calculating average manufacturer prices for its versions of the drugs cefdinir, clarithromycin, methotrexate and rheumatrex. As a result, Dava underpaid drug rebates to the Medicaid program and overcharged certain public health service entities for these products.

"Pharmaceutical companies that participate in Medicaid must accurately report drug prices and pay their fair share of rebates to the federal and statement governments," said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice.

The federal government's portion of the settlement is approximately $5.7 million. Dava will also pay over $5 million to the Medicaid participating states and approximately $200,000 to certain public health services entities who paid inflated prices for the drugs at issue.

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