The deal resolves allegations the drugmaker “deliberately inflated” the price of its Albuterol asthma med and other drugs, causing California’s Medicaid (Medi-Cal) program to overpay millions of dollars in pharmacy reimbursement, according to California attorney general Jerry Brown.

“With healthcare costs spiraling out of control, it’s unconscionable that a Fortune 500 pharmaceutical company deliberately inflated its drug prices to cheat California’s public healthcare system out of millions of dollars,” Brown says in a statement. “This is a company that made more than $12 billion in profits last year, yet still raided the pockets of California taxpayers.”

The case began with a lawsuit filed by a whistleblower against several drugmakers accused of Medicaid fraud, and is still proceeding against Dey, Mylan Pharmaceuticals, Sandoz, and their parent companies. The agreement is one of three settlements negotiated with Schering-Plough, collectively totaling $69 million, over falsely inflated drug prices (here is the settlement).

The three lawsuits were originally filed by a whistleblower, Ven-A-Care of the Florida Keys on behalf of California, Florida and the federal government. Schering-Plough also settled Florida and cut a deal with the federal government that involved a $44.5 million payment.

The settlement resolves allegations that Warrick Pharmaceuticals, a subsidiary of Schering-Plough, deliberately inflated the Average Wholesale Prices (AWPs) it reported to California for Albuterol. Medi-Cal sets the reimbursement rates for pharmacies for many of the drugs dispensed to Medi-Cal patients based on the AWPs reported by drugmakers, the statement says.

California pharmacies dispensed Albuterol to patients and were then reimbursed by Medi-Cal. By reporting falsely inflated AWPs, some drugmakers caused Medi-Cal to overpay millions of dollars in pharmacy reimbursement. Medi-Cal receives about half of its funding from the federal government and the rest from the State of California. Reporting fraudulent AWPs is a violation of the California False Claims Act, according to the AG statement.