Dive Brief:

Pfizer, which bought Wyeth in 2009, is paying a charge of $784.6 million to settle allegations related to Wyeth's miscalculation of Medicaid rebates between 2001 and 2006.

Specifically, 15 states have alleged Wyeth paid them lower rebates for Protonix, a gastrointestinal drug, compared with the amount it paid to private insurers.

Due to the settlement, Pfizer has revised its fourth quarter results downward to a loss of $172 million, instead of the previously reported profit of $613 million.

As the Financial Times notes, one of the two whistleblowers who brought forth the suit under the False Claims Act (FCA) in 2008 is Dr. William LaCorte, who has already made about $38 million in whistleblower payouts (before taxes and splitting fees with attorneys) by suing companies like Merck over the past 20 years. The Pfizer settlement could substantially add to that haul since whistleblowers are eligible to receive payouts that range from 15% to 30% of the total settlement in FCA cases.

Dive Insight:

According to federal policy guidance, the Medicaid Drug Rebate program is designed to help offset the costs of outpatient prescriptions for state governments, as well as state governments. Roughly 600 drugmakers are involved in this program, which operates in all 50 states, in addition to Washington, DC.

There are different calculations for determining the amount of the rebate. For innovator drugs, the rebate should be 23.1% of the average manufacture price per unit, or the difference between the AMP and the best price per unit as adjusted by the Consumer Price Index.

The failure of any company to comply with the rules of the Medicaid Rebate Program, including offering better prices to private insurers, can compromise the integrity of a program that many rely upon.

As for LaCorte and the matter of "serial whistleblowers?" Stay tuned for an upcoming feature on repeat fraud in pharma, and whether or not potential multimillion dollar rewards could incentivize unnecessary lawsuits.