Pharmaceuticals firm Nostrum Laboratories and its founder and chief executive officer could pay up to $50 million as part of a settlement with the Department of Justice (DOJ) addressing alleged violations of the False Claims Act by underpaying Medicaid rebates.

Nostrum and CEO Nirmal Mulye agreed to pay at least $3.8 million, with the remainder of the settlement total to be determined based on their respective financial conditions, the DOJ announced in a press release Monday. Portions of the remaining money would be split among Medicaid-participating states as part of separate settlements, according to the agency’s settlement agreement.

The total would not exceed the $50 million figure.

The details: Nostrum acquired its nitrofurantoin oral suspension (Nitro OS) drug from another manufacturer in December 2015. After temporarily pulling Nitro OS because of concerns about the amount of lead in the drug, the company resumed manufacturing and marketing of the drug in August 2018 at an increase of nearly $2,000 per bottle, resulting in significantly higher Medicaid drug rebate invoices.

From October 2018 through March 2020, Nostrum knowingly failed to pay the required rebate amounts owed for Nitro OS as invoiced by state Medicaid programs, the DOJ claimed. The company admitted it did not pay the entire invoiced amounts after trying unsuccessfully to argue the reintroduced version of Nitro OS was a new drug and that it should not have to pay rebates based upon the prior version’s price.

“The department is committed to ensuring that pharmaceutical manufacturers meet their obligations to taxpayer-funded healthcare programs, which support elderly and vulnerable populations,” said Principal Deputy Assistant Attorney General Brian Boynton of the DOJ’s Civil Division in the release. “As this settlement demonstrates, the department will hold accountable those who knowingly fail to satisfy these obligations.”

Nostrum did not respond to a request for comment.