Three weeks before a trial was scheduled to begin in federal court in Boston, Pfizer has agreed to pay more than $784 million to settle allegations that it overcharged state Medicaid programs for the Protonix heartburn drug. This 12 year old case, which was filed by two separate whistleblowers under the qui tam provisions of the False Claims Act, was joined by the Department of Justice in 2009. While well short of the $2B in liability claimed by the Department in court documents, the settlement is nonetheless the largest settlement to date involving alleged violations of the Medicaid Drug Rebate Program, which requires drug makers to provide Medicaid with their Best Price, or lowest discount price. In 2003, Getnick & Getnick LLP resolved the first such Medicaid Rebate case, against Bayer Corporation, for $257M. The government alleged that Pfizer, through its Wyeth unit, offered deep discounts on intravenous Protonix to thousands of hospitals nationwide through a bundled pricing arrangement, and that the drug maker then used these discounts to drive sales of oral Protonix when patients were discharged from hospital. Pfizer excluded from its Best Price reports the low prices given to hospitals. “By reporting false and inflated Best Prices, Wyeth improperly reduced its rebate payments by hundreds of millions of dollars and denied Medicaid the benefit of the low prices it was offering to thousands of hospitals,” according to the government’s complaint.