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St. Louis-based KV Pharmaceutical to Settle Medicaid False Claims Allegations


MADISON — Attorney General J.B. Van Hollen announced today that Wisconsin has joined other states and the federal government and reached an agreement in principle with KV Pharmaceutical Company to settle allegations that the company failed to advise the Centers for Medicare and Medicaid Services (CMS) that two unapproved products did not qualify for coverage under federal and state health care programs.


Medicaid provides healthcare coverage for the needy and disabled and is jointly funded by the state and federal governments. KV Pharmaceutical Company, which was the St. Louis-based parent company of now-defunct Ethex Corporation, will pay the state $404,181.39 as part of $768,289.70 attributable to Wisconsin Medicaid. The company will pay the states and the federal government a total of $17 million dollars to compensate Medicaid and various federal healthcare programs for its conduct.


“This agreement helps ensure that the neediest among us get the help they need,” Van Hollen said. “At the same time, taxpayers should know that their dollars are being used for the purpose intended, not to line the pockets of those who would exploit the program.”


Ethex is alleged to have submitted false quarterly reports to the government related to a pair of drugs, Nitroglycerin Extended Release Capsules (Nitroglycerin ER) and Hyoscyamine Sulfate Extended Release Capsules (Hyoscyamine ER). Nitroglycerin ER is a single entity coronary vasodilator containing controlled release nitroglycerin that was used for treating angina pectoris (chest pain due to lack of oxygen supply to the heart muscle). Hyoscyamine Sulfate ER is an antispasmodic medication that has been used to treat various stomach, intestinal and urinary tract disorders that involve cramps, colic or other painful muscle contractions. While the active ingredients in Nitroglycerin and Hyoscyamine Sulfate ER had been in products on the market for many years, the Food and Drug Administration (FDA) made determinations in the late 1990s that resulted in the drugs being ineligible for reimbursement by government health care programs such as Medicaid.


The settlement resolves allegations that Ethex misrepresented the regulatory status of both drugs and failed to advise CMS that these unapproved drugs did not qualify for coverage under federal health care programs. As a result, the government contends, Ethex knowingly caused false claims to be submitted for Nitroglycerin ER and Hyoscyamine Sulfate ER. Ultimately, neither drug ever received full regulatory approval for safety and effectiveness, and neither product is currently on the market.


The federal share of the comprehensive settlement is $10,158,695, and the states' Medicaid share of the settlement is $6,841,305. The lawsuit was brought under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private parties with knowledge of fraud to sue on behalf of the government and share in any recovery.