Miami pharma exec, a big Republican donor, agrees to pay up to $50 million to settle Medicaid civil fraud charges

By Dan Christensen, FloridaBulldog.org

A Miami businessman who once justified his decision to quadruple the price of a liquid antibiotic his company sold – to more than $2,300 a bottle – by asserting a “moral requirement to sell the product at the highest price” has agreed to pay up to $50 million to settle federal Medicaid civil fraud charges.

How much Nirmal Mulye and his company, Nostrum Laboratories, ultimately will have to pay will be based on their financial condition, federal fraud prosecutors said. The minimum amount they owe in the settlement, however, is $3.825 million.

Mulye lives in a $6 million, four-bedroom, five-bath condo in the flashy One Thousand Museum residential tower on Biscayne Boulevard. He describes himself as the “brain, founder and President of Nostrum Energy and its family of pharmaceutical and energy companies,” according to his LinkedIn page.

The large Medicaid fraud appears to have helped finance hundreds of thousands of dollars in campaign contributions that Mulye has made to Republican candidates and committees since 2019. One glaring exception: Sen. Bob Menendez, D-NJ, who along with his wife, Nadine, is currently under indictment for alleged bribery and other crimes.

In 2020, Florida Bulldog reported that Mulye was among a dozen wealthy South Florida megadonors who gave heavily to Trump Victory ($336,000) and the Republican National Committee ($174,000) during that year’s presidential race.

Miami-Dade election records state that Mulye is not affiliated with any political party and has been a registered voter here since June 2019.

A SCHEME IS BORN

Nostrum Laboratories specializes in making and selling generic and specialty drugs and is located in New Jersey and Missouri. The company’s name seems an odd choice. Merriam-Webster dictionary defines the word nostrum as either “a medicine of secret composition recommended by its preparer but usually without scientific proof of its effectiveness” or “a usually questionable remedy or scheme.”

The U.S. Justice Department’s Monday press release says the settlement will resolve allegations that Nostrum and its CEO violated the False Claims Act by “knowingly underpaying Medicaid rebates due for Nostrum’s drug Nitrofurantoin Oral Suspension, known as Nitro NS.”

The Medicaid Drug Rebate Program was established in 1990 in response to rising drug prices. The idea: to protect the U.S. from overpaying for prescription drugs. The program requires drug manufacturers to pay quarterly inflation-based rebates to state Medicaid programs in exchange for Medicaid’s coverage of their drugs.

Nitro OS is an antibiotic that’s used to prevent and treat infections of the kidneys, bladder and other parts of the urinary tract. Nostrum acquired the drug from another manufacturer in December 2015.

In January 2018, the press release says, it temporarily stopped making Nitro OS because “the amount of lead in the product did not comply with updated 2019 FDA (U.S. Food and Drug Administration) guidance. Nostrum resumed making and marketing Nitro OS in August 2018.

“Nostrum characterized the relaunched version of Nitro OS as a ‘reformulation,’ but Nostrum did not add or subtract any ingredients and the active ingredients remained unchanged,” the press release says.

Nevertheless, “Nostrum increased its price from $474.75 to $2,392.32 per bottle,” triggering much higher Medicaid drug rebate invoices from state Medicaid programs “on account of the inflation-based rebate,” the press release says.

A LOST ARGUMENT

In September 2018 Mulye told the Financial Times he raised the price of Nitro OS after a competitor, Casper Pharma, jacked up the price of its branded version of the same drug, known as Furadantin. A bottle of Furadantin then cost $2,800, a 182 percent increase since December 2015, the newspaper reported.

“The point here is the only other choice is the brand at the higher price. It is still a saving regardless of whether it is a big one or not,” Mulye told the newspaper.

From the fourth quarter of 2018 through the first quarter of 2020, when Nostrum withdrew from the Medicaid Drug Rebate Program, “Nostrum and Mulye did not pay these entire invoiced amounts, despite learning that the larger rebate invoices were tied to the price increase and inflation based rebate and being notified by [the] Centers for Medicare and Medicaid Services (CMS) that it should pay the higher calculated amounts.” Instead, Nostrum fired off a letter to CMS arguing that “this version of Nitro OS is actually a ‘new’ drug and that Nostrum shouldn’t have to pay rebates “based upon the prior version’s applicable price.”

Nostrum lost the argument.

“Nostrum Laboratories reduced the amount that it paid to the Medicaid program by improperly calculating the rebates it owed, even after hiking the cost of one of their drugs by over 400%,” said Jodi Cohen, special agent in charge of the FBI’s Boston Field Office.

The case was a joint investigation by the FBI, the Office of the Inspector General of the U.S. Department of Health and Human Services, the Massachusetts U.S. Attorney’s Office and the Justice Department Civil Division’s commercial fraud section.

The Nostrum case is part of the government’s push against healthcare fraud. Tips and complaints from all sources about potential fraud, waste, abuse and mismanagement can be reported to HHS at 800-HHS-TIPS (800-447-8477).