Office of the Attorney General
Attorney General Conway Announces $22 Million Settlement with Drug Manufacturer

Attorney General Jack Conway today announced that Kentucky will participate in a settlement with pharmaceutical manufacturers Schwarz Pharma, Inc. and Schwarz Pharma Manufacturing, Inc., to resolve claims related to the marketing and misrepresentation of the drugs Deponit and Hyoscyamine Sulfate. Under terms of the settlement, Schwarz has agreed to pay a total of $22 million to resolve claims brought by the federal government, Kentucky and other participating states that the drug manufacturer caused false claims to be submitted to the Medicaid program. Kentucky's state and federal portion of the settlement is $321,055, which represents the amount that Kentucky Medicaid expended for prescriptions written as a result of Schwarz's improper marketing practices.

"I am pleased that a settlement has been reached with Schwarz to stop the improper marketing of two of its products," General Conway said. "This should serve as a warning to other drug companies that fraud and abuse of the Medicaid program will not be tolerated."

Schwarz marketed Deponit, a transdermal nitroglycerin patch, to prevent attacks of angina (chest pain). In 1999, the Food and Drug Administration (FDA) determined that there was no substantial evidence that Deponit was effective in the treatment of angina and withdrew its prior approval of the drug. Nevertheless, Schwarz failed to advise the Centers for Medicare and Medicaid Services (CMS) that Deponit no longer qualified as an outpatient drug covered by the Medicaid program and continued to market the drug. Schwarz also began submitting false quarterly reports to CMS that misrepresented Deponit's regulatory status.

Schwarz also misrepresented the regulatory status of Hyoscyamine Sulfate extended release tablets and capsules, which are used to treat a variety of stomach and intestinal problems. Other forms of the Hyoscyamine Sulfate drug had been in use prior to 1962, so the drug had never been approved by the FDA.

In 1997, the FDA issued a new regulation in which extended release forms of Hyoscyamine Sulfate were considered "new drugs" and therefore required approval by the FDA before they could be marketed. As a result, extended release forms of Hyoscyamine Extended were no longer eligible for Medicaid reimbursement. Again, Schwarz misrepresented the regulatory status of these drugs to CMS, thereby enabling the extended release capsules and tablets to continue to be covered by the Medicaid programs.

Since Attorney General Conway took office in January 2008, his Office of Medicaid Fraud and Abuse Control has recovered or been awarded more than $135 million for the state and federal Medicaid programs. These cases range from lawsuits and settlements against pharmaceutical companies to cases against individual providers.

The Attorney General's Tip Line for reporting allegations of Medicaid fraud is 1-877-228-7384.