Nostrum Labs and CEO Settle Allegations of Underpaying Medicaid Rebates: From $3.8M to $50M in Potential Penalties

The United States Department of Justice declared on October 2 that pharmaceutical company Nostrum Laboratories, and its CEO Nirmal Mulye, will settle allegations of underpaying Medicaid rebates for their drug Nitrofurantoin Oral Suspension (Nitro OS). The agreed upon settlement ranges from $3,825,000 to $50 million, contingent on the financial condition of Nostrum and Mulye according to a press release from the Department of Justice.

Through the Medicaid Drug Rebate Program, pharmaceutical manufacturers are required to reimburse state Medicaid programs quarterly to secure coverage for their drugs. The motivation behind the program is to keep Medicaid insulated from drug price surges that exceed inflation. Following their acquisition of Nitro OS in December 2015, Nostrum and Mulye resumed production in August 2018. They subsequently hiked up the pricing heavily from $474.75 to $2,392.32 per bottle, resulting in an amplified rebate owed in accordance to the Medicaid Drug Rebate Program.

The crucial role of Medicaid in providing healthcare to countless Americans is undeniable. Acting United States Attorney Joshua S. Levy emphasized this in a statement, highlighting Medicaid as a lifeline to the most disadvantaged in society. He chastised Nostrum for deliberately neglecting their rebate obligations, profiteering at the expense of vulnerable patients.

Nostrum's actions, rendered inappropriate, were answered through a legal settlement. However, the settlement does little to mitigate the root concern of soaring drug prices and healthcare access disparities. The duty of resolving these complex concerns lies not solely on the pharmaceutical companies, but across policymakers, regulators, and all stakeholders in the healthcare system.