The federal agency, 15 states, and the District of Columbia have joined two whistleblower lawsuits claiming that Wyeth charged hospitals less than what it charged Medicaid for its heartburn treatment, Protonix. Drug companies are required to charge Medicaid the lowest price available to the private sector, but Wyeth allegedly gave discounts to hospitals in exchange for prescribing the drug and didn't offer the discounted rate to Medicaid.
Between 2000 and 2006 the Department of Justice says that the lack of a discount cost Medicaid "hundreds of millions of dollars." Ironically, Wyeth might only sell hundreds of millions of dollars of Protonix this year. The drug is facing generic competition from Teva Pharmaceuticals
Wyeth isn't the first company that has been caught up in Medicaid payment issues. Last year Merck
The good news for Pfizer's investors is that management may have seen this lawsuit coming and factored that into the $68 billion price tag. Even if they didn't, a few extra hundred million dollars to settle the lawsuit after the acquisition closes isn't going to affect whether the pharmaceutical giant made the right move by agreeing to buy Wyeth. That will only come from results after merging the two together.
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