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Kentucky Sues McKesson Corporation for Medicaid Fraud

The Kentucky Attorney General has sued McKesson Corporation, the country's largest drug wholesaler, and First Data Bank for Medicaid fraud, alleging that a conspiracy between the two resulted in the state's citizens paying tens of millions more for prescriptions than they should have. First Data Bank publishes national drug databases that provide drug information, including prices. Kentucky relies upon a compendium published by First Data to determine reimbursement rates for drugs under its Medicaid program. The complaint alleges that the defendants fraudulently inflated the average wholesale prices of drugs.

U.S. and Kentucky Law Require Reimbursement of Medicaid Providers

U.S. and Kentucky law require the reimbursement of Medicaid providers based on the estimated costs of acquiring drugs. Kentucky's reimbursements are based on the average wholesale costs of the drugs. The complaint alleges that since 2001 McKesson and First Data have been involved in a scheme to fraudulently inflate prices to boost their profits from taxpayer money and to actively conceal their actions. Allegedly the markup on prescription drugs was boosted from 20 percent to 25 percent. Because of the inflated prices, Kentucky has paid pharmacies and other Medicaid providers more than it would have otherwise but for the fraud. The case alleges violations of the Kentucky Consumer Protection Act, the Kentucky Medicaid Fraud Statute, the Theft by Deception Statute, and the False Advertising Statute. The defendants are also charged with false advertising, conspiracy, and other violations. The case involves more than 1,800 brand-name prescription drugs.

"This office has repeatedly sent the message to prescription drug companies that we will not tolerate fraud and abuse in the Medicaid program," said Attorney General Jack Conway. "This complaint, which alleges fraudulent inflation of average wholesale prices and resulting injury to our Medicaid program, is another signal of my continued commitment to enforcing the laws that protect Kentuckians.

Similar Suit From Michigan

This is not the first time McKesson and First Data have been the target of Medicaid fraud allegations. Last month the Michigan attorney general filed a similar suit against both companies. Part of the scheme was to boost the company's relationships with pharmacies and other Medicaid providers by boosting the reimbursement rates they received from state Medicaid plans.