K-V Pharmaceutical's $3 million Texas Medicaid fraud settlement OK'd

By Jim Witters

Wilmington, Del., June 20 - K-V Pharmaceutical Co. received approval for its settlement with the State of Texas and Ven-a-Care of the Florida Keys, Inc., according to a June 19 filing with the U.S. Bankruptcy Court for the Southern District of New York.

Under the settlement, Texas will have a $3 million general unsecured claim against K-V Pharmaceutical in full satisfaction of all Texas and/or Ven-a-Care claims.

The 14-day stay of effectiveness under the bankruptcy code is waived, and the order is immediately effective.

As previously reported, the state of Texas filed an action in December against the K-V debtors and dissolved subsidiary Ethex Corp., alleging that the defendants violated the Texas Medicaid Fraud Prevention Act in connection with specified pharmaceutical products as a result of allegedly knowingly "making false statements and misrepresentations of material fact to the Texas Medicaid program and concealing or failing to disclose the truth to the Texas Medicaid program."

The state's action stemmed from a lawsuit filed under seal in March 2000 by private person plaintiff/relator Ven-a-Care.

Texas also filed proofs of claim in unliquidated amounts against each of the eight K-V debtors in January based on the same allegations contained in the state's action.

In a stay enforcement motion, K-V claimed the identified drugs were products of non-debtor defendant Ethex and none of the debtors were required to provide reporting information for those drugs.

As part of the settlement, the Texas action and the company's stay enforcement motion will be withdrawn.

K-V Pharmaceutical, a St. Louis specialty pharmaceutical company, filed for bankruptcy on Aug. 4, 2012. Its Chapter 11 case number is 12-13346.

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