AG’s Office Settles Civil Medicaid Fraud Involving Alpha Therapeutic

August 13, 2009

The Texas Attorney General’s Office today announced it had reached a $1.2 million settlement agreement with Alpha Therapeutic Corporation that resolves the state’s investigation into the amount the pharmaceutical manufacturer charged Medicaid for its products.

According to state investigators, Alpha Therapeutic marketed several drugs that were dispensed to Medicaid patients under the names Alphanate, Alphanine, Profilnine and Venoglobulin.


In the mid-1990s, the company began improperly reporting its products’ prices and, as a result, Alpha guaranteed profits for its retail pharmacy customers at the expense of the taxpayer-funded health care Medicaid program.


State and federal law requires that drug manufacturers report the prices at which they sell their products to various providers, including pharmacies, wholesalers and distributors.


The Texas Medicaid program uses this pricing information to estimate the costs Medicaid providers pay to acquire the drug manufacturers’ products. Medicaid providers bill the state-run program for these costs, plus prescription dispensing fees, and Medicaid reimburses the providers.

When a manufacturer reports inflated prices to the Medicaid program, as happened in this case, the taxpayer-funded program overpays providers for their products, the AG’s Office said in announcing the settlement. The difference between what a provider actually pays to purchase a drug and what is reimbursed by Medicaid is called the “spread.”

Because of Alpha Therapeutic’s improper reporting, Texas Medicaid over-reimbursed providers for the defendants’ drugs. The windfall profits from these inflated reimbursements, which date back to the early 1990s, induced providers to favor Alpha Therapeutic over other manufacturers. The result was a long-term, but unlawful, market niche for the company.

Today’s enforcement action began with a sealed whistleblower lawsuit filed by home-infusion pharmacy Ven-a-Care of the Florida Keys Inc.


Acting on similar information from Ven-a-Care, the Attorney General has taken action against numerous defendants that launched similar drug-pricing schemes. Those cases are still pending.

InstantNewsWestu Staff

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