Sepracor will have to restate earnings due to internal investigation of Medicaid price reporting practices, and postpones earnings release:
>>Sepracor Announces Internal Review of Government Price Reporting Matters
Monday January 28, 4:37 pm ET
MARLBOROUGH, Mass.--(BUSINESS WIRE)--Sepracor Inc. (Nasdaq: SEPR - News) announced today that it is conducting a review of its government price reporting. On January 17, 2008, Sepracor notified the Centers for Medicare and Medicaid Services (“CMS”) that the Company has identified potential errors in its Medicaid Best Price (“Best Price”), including the exclusion of transactions involving the Pennsylvania General Assistance ("PAGA") Program from its calculation of Best Price, for products reimbursed under the Medicaid Drug Rebate Program (42 U.S.C. §1396r-8). Despite the Company’s review of available materials, it remains unclear whether PAGA, a State Pharmacy Assistance Program, is excludable for the purposes of calculating Best Price for the affected periods. If these PAGA transactions had been included in the calculation, they potentially would have set Best Price for some previously reported calendar quarters.
The Company also notified CMS regarding a review of instances in which it appears that it provided a price reserved for qualified Public Health Service ("PHS") covered entities to customers that were not qualified to receive this PHS price. PHS prices provided to qualified entities are exempt from the Best Price calculation. If the prices provided to the entities that did not qualify as PHS entities had been included in the calculation, they potentially would have set Best Price for at least some previously reported calendar quarters. Sepracor is reviewing the circumstances under which these customers received the PHS price.
As a result of these matters, Sepracor’s management, with the oversight of the Company’s Audit Committee, is reviewing its government pricing and the effectiveness of its internal controls and procedures in this regard. Based on the outcome of the review, the Company may be required to revise the prices reported under its federal Medicaid rebate agreement, other federal programs and certain state agreements, and to pay the corresponding additional rebate amounts or other amounts due under those programs for the period 2002 through 2007. If the Company is required to make such payments, it currently estimates that the aggregate amount of any additional rebate payments and other amounts due for this six year period will be between $80 million and $100 million. The review is ongoing and the Company cannot be certain that the amount of any additional rebate payments or other payment will not exceed the Company’s current estimate or that it will not be subject to additional penalties.
Based on the results of its initial review, the Company has concluded that it will likely need to restate its financial statements for the quarters ended March 31, June 30 and September 30, 2007 and 2006 and the fiscal years ended December 31, 2006, 2005, 2004, 2003 and 2002. Accordingly, on January 28, 2008, Sepracor management and its Audit Committee determined that such financial statements and all earnings releases and Forms 8-K filed pursuant to Item 2.02 relating to periods commencing on January 1, 2002 should no longer be relied upon. In addition, as a result of its ongoing review, the Company has postponed its conference call and webcast for fourth quarter and full-year 2007 operating results and currently expects to hold such call and webcast, and file its Annual Report on Form 10-K, on or before February 29, 2008.<<
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The markets love uncertainty. Sepracor was up briefly on the inlicensing news, but is now down some after hours on this. Actually, down a fair amount now, back into the $25 range.
Cheers, Tuck |
