Nostrum Laboratories, a pharmaceutical company in the US, along with its Indian-origin CEO Nirmal Mulye, has agreed to resolve allegations of knowingly underpaying Medicaid rebates for their drug Nitrofurantoin Oral Suspension (Nitro OS).
As part of the settlement, they have committed to pay a minimum of $3,825,000, potentially up to $50 million if certain financial conditions are met.
Under the Medicaid Drug Rebate Program, drug manufacturers must pay rebates to state Medicaid programs in exchange for Medicaid coverage of their drugs, designed to protect the program from excessive price increases.
Nostrum Laboratories is accused of improperly calculating these rebates, even after raising the cost of one of their drugs by over 400 percent. They temporarily halted production of Nitro OS in 2018 due to lead levels exceeding FDA guidelines but resumed production after making modifications.
Despite relaunching the same product with no significant changes, they increased the price substantially, leading to higher Medicaid Drug Rebate invoices. However, Nostrum did not pay these invoices in full.
The US government contended that Nostrum and Mulye knowingly failed to pay the required rebate amounts for Nitro OS, resulting in civil claims against them from October 2018 to March 2020.
