Litigation involving drug price reporting under the Medicaid Drug Rebate Program (MDRP)¹ has been very active in 2022. Most recently, on August 3, 2022, an Illinois federal jury levied a $61 million verdict against Eli Lilly and Co. for erroneous price reporting practices under the MDRP (discussed below). This follows a number of settlements in 2021 with the U.S. Department of Justice (DOJ) related to the MDRP.

Background

The MDRP is implemented by the U.S. Department of Health and Human Services (HHS) and involves oversight from the Centers for Medicare and Medicaid Services (CMS) and state Medicaid agencies, as well as active participation from drug manufacturers. The MDRP requires drug manufacturers to pay a rebate for all drugs dispensed to Medicaid beneficiaries. The required rebate is set by statute and is intended to ensure the net price of a drug for Medicaid beneficiaries is either equal to (a) the “Best Price” for the drug available in the private market or (b) a percentage of the drug’s “average manufacturer price” (AMP) — whichever gives Medicaid the lowest price. Brand name drugs require the greatest rebate and generics the lowest. The rebate is designed to insulate the Medicaid program from drug price increases that might outpace inflation.

CMS uses data reported by drug manufacturer to calculate what is called a “unit rebate amount” (URA). Manufacturers pay states rebates for each unit of the drug on the basis of the URA. Misreported prices run the risk of...

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