$50 Million to Be Paid by Nostrum Labs Over Underpayment of Medicaid Rebates

Nostrum Laboratories and its CEO have struck a potential $50 million settlement with the Department of Justice (DOJ) to resolve allegations the company knowingly underpaid Medicaid rebates for its Nitrofurantoin Oral Suspension (Nitro OS) generic product.

Under the Medicaid Drug Rebate Program, drugmakers must pay CMS quarterly rebates based on the price of a drug. From the fourth quarter of 2018 through the first quarter of 2020, the DOJ said, Nostrum paid rebates based on the original price of $474.75 for the drug, a treatment for urinary tract infection, despite raising the price by 400 percent, to $2,392.32, in 2018. CMS notified the company that larger rebate amounts were owed due to the price increase.

Nostrum, which operates in Missouri and New Jersey, as well as its founder and CEO Nirmal Mulye, will pay at least $3,825,000 and as much as $50 million “if certain financial contingencies are met,” the DOJ said.

According to the DOJ, Nostrum stopped manufacturing Nitro OS in January 2018 due to the amount of lead in the product conflicting with an updated 2018 FDA guidance. “After modifying quantities of two inactive ingredients to reduce overall lead levels, Nostrum resumed manufacturing and marketing Nitro OS in August 2018” and characterized the relaunched version of Nitro OS as a reformulation. “But Nostrum did not add or subtract any ingredients and the active ingredients remain unchanged,” the DOJ said.

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