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GlaxoSmithKline reaches $3 billion settlement

Eve Troeh Nov 3, 2011
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GlaxoSmithKline reaches $3 billion settlement

Eve Troeh Nov 3, 2011
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Steve Chiotakis: In Britain, drug maker GlaxoSmithKline will pay the U.S. government $3 billion to settle a handful of long-lasting legal claims. Some of those charges are for Medicaid fraud, an area where federal prosecutors have been getting tough.

Marketplace’s Eve Troeh reports.


Eve Troeh: Medicaid rebates work like this: drug companies sell medicine to doctors, then they tell the government how much they charged and Medicaid pays the doctors back. It’s supposed to be zero sum game based around a drug company figure called the average wholesale price, or AWP.

Gail Wilensky: There’s a quip that says AWP stands for “ain’t what’s paid.”

Gail Wilensky uses to run Medicaid. Now she’s with the nonprofit Project Hope. She says drug companies have been charging doctors one price then telling the government to reimburse them for more. The doctors pocket the difference.

When the feds notice, they sue. And most drug companies — inlcuding GlaxoSmithKline — have millions or billions of dollars set aside to fight it. That’s why the government goes after them first.

But Wilensky says truly stopping fraud takes more.

Wilensky: You do have to look not just at the deepest pocket, but going to look more broadly, to aggressively go after individuals or hospitals or drug companies or device companies that are not following the rules.

The government has set up two new task forces to do that. Federal prosecutors plan to double their cases for healthcare fraud this year.

I’m Eve Troeh for Marketplace.

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