Drug maker Sandoz last week reached a $12.64 million settlement with the Department of Health and Human Services Office of Inspector General to resolve allegations that it misrepresented drug pricing data to the Medicare program. The Sandoz settlement is the largest ever entered into under OIG’s drug price reporting civil monetary penalty authority.

Federal law requires drug makers to report both accurate and timely Average Sales Price (ASP) information to the Centers for Medicare & Medicaid Services (CMS), which then uses this information to set payment amounts for most drugs covered under Medicare Part B. OIG can seek penalties against drug makers that misrepresent, or fail to timely report, pricing information.

Under the statute, drug makers can face a maximum civil penalty of $100,000 for each item of false information that is knowingly provided in the ASP reporting to CMS. “The Medicare program relies on drug manufacturers to accurately report pricing information,” said OIG Chief Counsel Gregory Demske.

“Sandoz’s misrepresentations undermined the integrity of the Medicare Part B drug pricing system,” Demske said. “We will continue to penalize manufacturers that misrepresent or fail to timely file the required information.”

Ellyn Sternfield, of counsel with law firm Mintz Levin, wrote in a client alert that the settlement raises more question than answers. For one, HHS did not discuss how the case arose. “Whether the case was the result of a self-disclosure, OIG investigation, or whistleblower report, was not addressed by HHS-OIG in its press release on the case,” Sternfield wrote. Sandoz did not issue a press release on the settlement.

Nor did OIG disclose many details on the allegations, other than to say that, between January 2010 and March 2012, Sandoz misrepresented Average Sales Price data to CMS. “Neither the settlement nor the HHS-OIG press release provide information as to what Sandoz drugs were implicated, the nature of the price reporting inaccuracy, or the impact of inaccuracy,” Sternfield wrote.

OIG previously pursued CMPs against Sandoz for late reporting of drug pricing information to CMS. That case was settled in 2011 with Sandoz paying $230,000.

The settlement includes a certification by Sandoz that it has established a government pricing (GP) compliance program, which includes a GP compliance director and GP compliance committee.

The compliance program also includes:

A code of conduct and written policies, requiring written GP methodologies;

A GP-specific training program;

A disclosure program that allows for confidential disclosure and investigation of potential compliance violations and disciplinary procedures; and

An auditing and monitoring program.

Sandoz has denied liability and no judgment or finding of liability has been made against Sandoz.

OIG said the issue of late or inaccurate reporting of drug pricing information has been a “longstanding area of concern for OIG.” OIG’s Office of Evaluation and Inspections has issued several reports relating to price reporting by manufacturers. In 2010, OIG issued a Special Advisory Bulletin notifying drug makers of its intent to pursue CMP actions for failure to meet reporting requirements.

The settlement, which the Department of Justice was not a party to, doesn’t provide any release from potential false claims liability. Sternfield concluded: “It remains to be seen whether the HHS-OIG settlement with Sandoz is the conclusion of a government enforcement effort, or merely the first stage.”

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