After the State of Virginia declined to participate in a July 2012 settlement that McKesson reached with 29 states over allegations of federal and various state False Claims Act violations, the company has agreed to pay Virginia $37 million over allegations that McKesson violated the Virginia Fraud Against Taxpayers Act by conspiring to inflate prices for prescription drugs. Under the 2012 settlement, which totaled $151 million, New York received $64 million and California received approximately $23 million, with the rest of the settlement split among the remaining states and Washington, D.C. In April 2012, the federal government settled its share of the lawsuit for $187 million.

The settlements stem from a 2005 whistleblower lawsuit alleging that, between 2001 and 2009, McKesson reported inflated “Average Wholesale Prices” that state Medicaid programs use to determine Medicaid reimbursement for prescription drugs. The original qui tam lawsuit was filed in the U.S. District Court for New Jersey. See U.S. ex rel. Morgan v. Express Scripts, Inc., et al., Civ. Action No. 05-1714 (D. N.J. Mar. 28, 2005). Virginia’s Attorney General filed its 2011 lawsuit against McKesson in the U.S. District Court for the Northern District of California, where McKesson is headquartered.  See Virginia v. McKesson Corp., 3:11-cv-02782-SI (N.D. Cal. June 8, 2011).