Tennessee will receive approximately $2 million as part of a national agreement with one of the largest American drug distributors, McKesson Corp. for allegedly causing the government to overpay for prescription drugs, Attorney General Bob Cooper announced Friday.

McKesson is alleged to have violated the Federal False Claims Act and various state false claims acts by reporting inflated pricing data for a large number of prescription drugs. As a result, state Medicaid programs such as TennCare had to overpay for a variety of drugs.

At issue in this case was the drug pricing data known as the “Average Wholesale Price” (AWP) benchmark used by most states, including Tennessee, to set drug reimbursement rates for some pharmaceuticals dispensed to Medicaid recipients. Tennessee alleges McKesson reported inflated AWP pricing data to First Data Bank (FDB), a publisher of drug prices, thereby inflating many AWPs used by Tennessee to set reimbursement. In April, the federal government settled the federal portion of this lawsuit for over $187 million. The agreement recovers the state Medicaid share for Tennessee.

“Tennessee has no tolerance for any corporation that would intentionally manipulate an already complicated system for which the state must obtain drug cost reimbursements,” Attorney General Cooper said. “We appreciate the diligence of our federal and state partners who work tirelessly strive daily to stop this behavior.” 

"The Tennessee Bureau of Investigation's Medicaid Fraud Control Unit is proud to be a part of the National Association of Medicaid Fraud Control Units," said TBI Director Mark Gwyn. "TBI is dedicated to working with our state and federal counterparts to ensure that healthcare providers, no matter how large or how small, will not profit by defrauding our state's Medicaid program. This case is an example of that dedication."

Tennessee’s share of the national multi-state settlement announced today is $1,972,795. The total overall settlement for all the states and federal government is more than $151 million.

The suit was filed in US District Court in New Jersey. To date, federal and state governments have also recovered more than $2 billion from drug manufacturers that were alleged to have reported inflated AWP information to FDB and other publishers of drug prices.

Tennessee was represented by a national settlement team comprised of members from the states of California and New York working through the National Association of Medicaid Fraud Control Units.