The State of Texas and the federal government will share in a hefty settlement from a pharmaceutical company.

The two governmental entities will equally share in a $5 million settlement with Major Pharmaceuticals Inc. and co-defendant The Harvard Drug Group LLC.

Under state and federal law, drug manufacturers must file reports with the Medicaid program that disclose the prices they charge pharmacies, wholesalers, and distributors for their products.

When manufacturers improperly report inflated market prices for their drugs, Medicaid reimburses pharmacies at inflated rates. The difference between the reimbursement amount and the actual market price is referred to as the “spread,” according to Texas Attorney General Greg Abbott’s Office.

Abbott’s office charged Major with using illegally created spreads to unlawfully induce pharmacies and other providers to purchase the company’s products.

The settlement includes attorney fees and a relator share recovered from the Michigan-based defendant.

Since Medicaid is jointly funded by the state and the federal government, the federal government is entitled to a share of the total settlement.

The improper price reporting was first identified by Ven-A-Care of the Florida Keys Inc., a pharmacy that subsequently filed a whistleblower lawsuit.

Under the Texas Medicaid Fraud Prevention Act, Ven-A-Care is entitled to a share of the overall recovery as well.