Best Price Fraud

Best Price Fraud is one of the most common types of pharmaceutical fraud perpetrated by drug manufacturers, but unfortunately it is also one of the most difficult to discover and prosecute. Often, Best Price Fraud cannot be addressed without the help of qui tam whistleblower lawsuits brought by those with knowledge of the fraudulent price reporting. This is because under the current Medicare/Medicaid state rebate system, the responsibility for accurately reporting the Best Price available for a given drug rests with the very drug manufacturer who is affected by the rebates.

Defining Best Price Fraud

The Medicare Rebate Program is designed to ensure that the reimbursement rate Medicare and Medicaid pay for prescription drugs is not higher than the prices offered to other entities by the pharmaceutical manufacturer. Essentially, the goal is to give taxpayers (via Medicare/Medicaid) the lowest available price on prescription drugs provided under those programs.

Under the Medicare Rebate Program, pharmaceutical companies are required to provide rebates to states to compensate for any drugs purchased above the manufacturer’s Best Price. The company reports its Best Price for a given drug to the Center for Medicare and Medicaid Services (CMS), which calculates the unit rebate amount and reports that amount to the state Medicare/Medicaid agency, which calculates the total rebate.

Clearly, there is great potential for fraud in this system as pharmaceutical companies have a huge incentive to falsify their Best Price reporting in order to decrease their overall rebate liability. Failure to accurately report the Best Price, which is supposed to include any discounts, grants, coupons, rebates, and other incentives offered to purchasers, constitutes pharmaceutical fraud under the False Claims Act.

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