The biggest names in generics - Mylan Labs, Teva and the Sandoz unit of Novartis - are accused of a scheme that cost Texas tens of millions of dollars in overpayments to retailers for prescriptions dispensed under Medicaid. “Texas taxpayers will not tolerate the abuse of our Medicaid system and those who depend on it for their health care,” Texas attorney general Greg Abbott tells The Houston Chronicle.

He contends the drugmakers sold Medicaid-covered drugs to large retailers at deep discounts that weren’t reported to the state. Because the Texas Medicaid Program sets reimbursement costs to retailers based on prices reported by drug manufacturers, their failure to disclose the true prices resulted in the state overpaying retailers, according to the lawsuit.

Retailers aren’t named as defendants because they weren’t required to report to the Medicaid program the price they paid for the drugs, but the alleged false statements were made by the manufacturers. The “spread” between what the companies paid drug makers for the prescriptions, and the amount the retailers were reimbursed by the Medicaid program in Texas for the drugs, was meant to induce the retailers to buy from the defendants in the case.

That increased the pharmaceutical companies’ sales “and thus their profits, all to the detriment of the Texas Medicaid program, the beneficiaries thereof, and the taxpayers of Texas,” according to the lawsuit. An exact tally of the amount overpaid by the state still is being determined, but state officials believe it’s at least tens of millions of dollars.

During a budget hearing in the recent legislative session, Abbott was pressed by lawmakers to work on a backlog of 140 Medicaid fraud cases. Sen. Steve Ogden, R-Bryan, Senate Finance Committee chairman, told him in February, “The taxpayers of Texas need some more protection than they’re actually getting. I’m encouraging you to develop a more aggressive program to do this.”

Abbott requested additional funds for the task and lawmakers appropriated $12.2 million over the next two-year budget period to hire 41 additional employees to pursue civil Medicaid fraud. Kelley said Abbott “absolutely” has aggressively and successfully pursued fraud cases since taking office. Abbott’s office said Wednesday it has recovered almost $190 million through its civil and criminal Medicaid fraud sections.