AUSTIN – Texas Attorney General Greg Abbott today Wednesday, Sept. 4 that the State of Texas and the federal government will equally share in a $5 million settlement with Major Pharmaceuticals Inc. to resolve civil Medicaid fraud claims. Also named in the settlement is co-defendant The Harvard Drug Group LLC.

The settlement includes attorney fees and a relator share recovered from the Michigan-based defendant. Because Medicaid is jointly funded by the State and the federal government, the federal government is entitled to a share of the total monetary settlement.

The State’s enforcement action accused Major of misreporting the price of various generic drugs to the Medicaid program. As a result, the taxpayer-funded program was overcharged for certain of Major’s products.

Under state and federal law, drug manufacturers must file reports with the Medicaid program that disclose the prices they charge pharmacies, wholesalers and distributors for their products. When manufacturers improperly report inflated market prices for their drugs, Medicaid reimburses pharmacies at vastly inflated rates. The difference between the reimbursement amount and the actual market price is referred to as the “spread.” The Office of the Attorney General’s enforcement action charged Major with using their illegally created spreads to unlawfully induce pharmacies and other providers to purchase the company’s products.

The defendants’ improper price reporting was first identified by Ven-A-Care of the Florida Keys Inc., a pharmacy that subsequently filed a whistleblower lawsuit pursuant to the Texas Medicaid Fraud Prevention Act. The State of Texas intervened in the case to recover fraudulent overpayments made by the Medicaid program to pharmacies based on the prices reported by Major. Under the act, Ven-A-Care is entitled to a share of the overall recovery.