The State of Texas has reached a $19.5 million settlement with Taro Pharmaceuticals USA Inc. to resolve allegations that the drug company fraudulently reported inflated drug prices to the Medicaid program. Taro will pay $8.75 million to the state’s general revenue fund. The federal government is also entitled to part of the settlement proceeds since it jointly funds the Medicaid program with the state. The federal government will receive $8.75 million, with the state keeping the remaining $2 million of the settlement funds for attorneys’ fees and costs.

Taro violated Texas law by misreporting the prices of numerous drugs to Medicaid for 11 years. Dozens of pharmaceutical manufacturers have been investigated for reporting inflated drug prices to the Medicaid program since 2000. Drug manufacturers are required under state law in Texas to file reports with the Medicaid program that reveal the prices they charge pharmacies, distributors and wholesalers for their products.

Taro used illegally created spreads – a difference between the reimbursement amount and the actual market price of the drug – to illegally induce pharmacies and other providers to purchase Taro’s drugs. Recoveries for the State of Texas by the Civil Medicaid Fraud Division have exceeded $500 million since 2002. The liability theories in Texas were identical to the theories utilized in all of the states that sued drug companies over the Medicaid fraud. Our law firm represented 8 of those states and were able to recover a huge amount of money for the taxpayers.


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