Enforcement Action Update: Drugmaker and CEO Resolve FCA Violations of Underpaying Medicaid Rebates

According to a recent U.S. Office of Public Affairs News Release, Nostrum Laboratories Inc. (“Nostrum”) and its founder and CEO, Nirmal Mulye, Ph.D. have agreed to resolve alleged violations of the False Claims Act by knowingly underpaying Medicaid rebates regarding its drug Nitrofurantoin Oral Suspension (Nitro OS). The company and CEO will pay a minimum of $3,825,000 and up to $50 million if certain financial contingencies are met.  Nostrum and Mulye admitted to multiple violations, including but not limited to: 

• Continuing to market Nitro OS pursuant to its preexisting FDA approval from 2015  after acquisition from another manufacturer.
• Relaunching and marketing a version of Nitro OS in 2018 as a “reformulation,” but not adding or subtracting any ingredients and the active ingredients did not change.  
• After relaunching Nitro OS in 2018, Nostrum increased its price from $474.75 to $2,392.32 per bottle, which triggered significantly higher Medicaid Drug Rebate invoices from State Medicaid programs.  
• From 2018 to 2020, Norstrom did not pay the entire Medicaid invoiced amounts. Nostrum withdrew from the Medicaid Drug Rebate Program in 2020. 

A copy of the News Release is available here.

For more information regarding DOJ enforcement, please see the Government Prosecutions section of the Enforcement Actions Database. Log In here.