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Schering-Plough Corp. and two of its subsidiaries agreed Monday to pay $27 million to settle accusations that it overcharged Texas and the federal government for prescription breathing drugs. The agreement is the first settlement of Medicaid lawsuits Schering-Plough faced in 10 states over drug pricing policies. The settlement covers Kenilworth, N.J.-based Schering-Plough Corp. and subsidiaries Schering Corp. and Warrick Pharmaceuticals Corp., the company’s generic drug manufacturer. The companies were accused of artificially inflating prices charged to the Texas Medicaid program for albuterols, which are given to treat asthma and other breathing problems. Texas Attorney General Greg Abbott said the artificially inflated prices led to inflated reimbursements to retail pharmacies, amounting to millions of dollars. “In essence, the companies used this pricing scheme as a marketing tool to increase profits, with taxpayers picking up the tab,” Abbott said. In a statement, Schering-Plough CEO Fred Hassan said the company was pleased to resolve the litigation and that the settlement “is another step forward as we build the new Schering-Plough.” Last year, Texas reached an $18.5 million settlement with Napa, Calif.-based Dey Inc., another pharmaceutical company accused of falsifying price reports. Texas law requires drug manufacturers to report the prices at which they sell their products to wholesalers and distributors. The Texas Medicaid program then uses the information to calculate provider cost and reimburses Medicaid providers accordingly. The attorney general’s Civil Medicaid Fraud Section found that some companies deliberately falsified pricing reports to benefit customers, which led to overpayments by the Texas Medicaid program. “The Medicaid program was created to help ensure that those least able to afford health care received medical treatment — not to enrich drug companies,” Justice Department official Peter D. Keisler said in a statement. Copyright 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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