BOISE (Legal Newsline) - Idaho Attorney General Lawrence Wasden announced a settlement on Thursday with a prescription drug manufacturer resolving allegations related to the average wholesale price reported by the company.

Merck Sharp & Dohme Corp., formerly known as Merck & Co. Inc., agreed to pay $1.6 million after allegedly inflating average wholesale price reporting to Idaho Medicaid.

Idaho Medicaid provides healthcare services, including prescription drugs, to low-income Idahoans. By law, Idaho Medicaid must reimburse pharmacies at the estimated acquisition cost of a drug. It primarily uses average wholesale price, which is reported by drug manufacturers, to determine the reimbursement.

If the manufacturer reports a false or inflated average wholesale price for a drug, taxpayers can pay too much for the drug through Medicaid reimbursements.

One unit of Merck's pharmaceutical product Pepcid had a published average wholesale price of $2.154 in 2003. Wasden alleged that the actual average wholesale price of the drug was $1.714 in 2003. This led to a 26 percent difference between the published price and the actual price.

"The publishing of false drug prices harms taxpayers and the state," Wasden said. "My office has investigated and litigated this matter and what we uncovered is that in a very large number of instances, drug manufacturers reported false and inflated prices for their drugs."

The $1.6 million settlement will reimburse taxpayers for the allegedly excessive prices Idaho Medicaid paid for prescription drugs as a result of the inflated average wholesale price reported.

More than $360,000 will be deposited in the state's General Fund, which will be appropriated by the Idaho legislature, $50,000 will go to the consumer protection account to reimburse Wasden's office for legal costs and more than $900,000 will go to the state's Cooperative Welfare Fund to be applied as a credit against the federal government's next payment to Idaho Medicaid. The federal government pays for approximately 70 percent of the cost of the state's Medicaid program.

As part of the settlement, the company admitted no liability or wrongdoing.

"This settlement addresses the harm incurred by Idaho's taxpayers and the state," Wasden said. "It should stop the reporting of false and misleading drug prices and provide the state significant financial relief. This settlement is good for Idaho because it successfully resolves this dispute without the need for further, costly litigation."

Wasden has resolved 11 average wholesale price cases with drug manufacturers since 2005, resulting in more than $15 million recovered. There are three average wholesale price cases that name 17 other drug manufacturers still pending.