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Drug Company Paying Millions To Government Over Claims It Lied

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BEAUMONT (CBSDFW.COM/AP) — A Mississippi-based pharmaceutical company has agreed to pay $2.8 million to resolve civil allegations that the manufacturer falsely marketed skin products to receive government funding.

The U.S. Attorney for the Eastern District of Texas, John M. Bales, said Wednesday that Cypress Pharmaceutical Inc., a subsidiary and CEO Max Draughn will pay $1.6 million to the military’s TRICARE program and $1.2 million to state Medicaid programs.

The government alleges that Cypress subsidiary Hawthorne Pharmaceuticals Inc. falsely claimed that three skin products carried the Food and Drug Administration’s “safe and effective” designation. The government also claims the regulatory status of the products was misrepresented.

Bales says a whistleblower received $300,000 as part of the settlement.

Joseph Zwicker, an attorney for Madison, Miss.-based Cypress, said the settlement involved “a fraction” of the original allegations, and the company denied any wrongdoing.

(Copyright 2012 CBS Local.  The Associated Press contributed to this report.)

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