FOR IMMEDIATE RELEASE CIV TUESDAY, OCTOBER 31, 1995 (202) 616-2765 TDD (202) 514-1888 DRUG COMPANY WILL PAY U.S. $7.5 MILLION TO SETTLE ALLEGATIONS IT FAILED TO INFORM GOVERNMENT ON CONTRACTS WASHINGTON, D.C. -- A generic drug distribution company will pay the government $7.5 million to settle allegations it overcharged the Department of Veterans Affairs for generic drugs, the Department of Justice announced today. Assistant Attorney General Frank Hunger of the Civil Division and U.S. Attorney James B. Burns of Chicago said the settlement resolves charges brought against Modern Wholesale Drug Midwest Inc., doing business as Rugby Laboratories, by a former employee, Eileen Doran. The case was brought under the qui tam provisions of the False Claims Act in U.S. District Court in Chicago, Illinois, in 1994. The complaint alleged that Rugby failed to inform government negotiators fully about its pricing policies. The company gave the government discounts that were lower than what it gave other customers. Under the contract solicitation and federal law, Rugby was required to provide accurate information to VA contract negotiators. Rugby won a five-year, $40 million contract with the VA in 1991 for the sale of generic drugs that were used in VA hospitals. The contract set the prices, terms and conditions under which federal agencies could purchase the drugs from Rugby. Under the settlement, Doran will receive $1,050,000 for bringing the matter to the attention of the government. Under the qui tam provisions of the False Claims Act, a private party can file an action on behalf of the United States and receive a portion of the settlement if the government takes over the case and prosecutes it successfully. The case was investigated by the Office of Inspector General of the VA. The Civil Division and the Office of the U.S. Attorney negotiated the settlement. ##### 95-556