WASHINGTON (Reuters) - Pfizer Inc

has agreed to pay $784.6 million to resolve allegations that Wyeth, which it acquired in 2009, underpaid drug rebates to Medicaid, the federal health insurance program, the Justice Department said on Wednesday.

The settlement resolves claims by the U.S. and states that Wyeth knowingly reported false and fraudulent prices on two of its anti-acid drugs, Protonix Oral and Protonix IV, the Justice Department said.

Pfizer acquired Wyeth in 2009, about three years after Wyeth had ended the conduct that led to settlement, the Justice Department said.

"We are pleased to have finalized the agreement to resolve these cases, which involve historic conduct that occurred at least 10 years ago, before we acquired Wyeth,” said Doug Lankler, Pfizer executive vice president and general counsel, in a statement.

"The resolution of these claims reflects our desire to put these historic cases behind us and to focus on the needs of patients," Lankler said.

Wyeth offered hospitals deep discounts on bundles that included both drugs when made available to staff and patients, the government said in a statement about its complaint.

Wyeth wanted to induce hospitals to buy and use Protonix Oral, a drug they would otherwise have little incentive to prescribe because of other drugs that were already on the market and competitively priced, the Justice Department said.

But Wyeth hid the bundled discounts from Medicaid, the Justice Department said.

The misrepresentations came to light after a whistleblower, Lauren Kieff, a former hospital sales representative for another drug company, and William St. John LaCorte, a New Orleans-based doctor, filed a False Claims Act lawsuit, the Justice Department said. Two will share a $98 million cut of the settlement, the Justice Department said.

The settlement requires that Wyeth pay $413,248,820 to the U.S. and $371,351,180 to state Medicaid programs.

About $93.7 million of the settlement will resolve claims relating to New York state's Medicaid program, New York Attorney General Eric Schneiderman said in a statement on Wednesday. The state will receive $55.6 million of that sum.

(Reporting by Suzanne Barlyn in New York; Additional reporting by Diane Bartz and Toni Clarke in Washington; Editing by Chizu Nomiyama and Meredith Mazzilli)