Merck To Pay $671M To Settle Medicaid Overbilling Lawsuits
Merck on Thursday agreed to pay $650 million plus interest to settle two lawsuits alleging that the company overcharged Medicaid for three of its most popular prescription drugs: arthritis treatment Vioxx, anticholesterol treatment Zocor and the ulcer medication Pepcid, the Washington Post reports (Johnson, Washington Post, 2/8).
With interest, the settlement totals $671 million, Merck said (Johnson, AP/Houston Chronicle, 2/8).
The first lawsuit was filed in Pennsylvania in 2000 and Nevada in 2005 and was joined by the Department of Justice and all states except Arizona. In the suit, a former employee alleged that the company provided Zocor, the anticholesterol treatment Mevocor and Vioxx to hospitals at discounts of more than 90% if the hospitals helped the company reach market-share goals. This practice provided an unfair incentive for physicians to prescribe the drugs, the plaintiffs said.
Under federal law, drug manufacturers must offer Medicaid the best price that they offer to any customer, but drugs sold at discounts of 90% or more do not need to be disclosed to the government. The exception was intended to allow drug companies to make less-costly prescription drugs available to charitable organizations. Although the law does not specify who can receive the undisclosed discounts, the plaintiffs argued that the hospitals could not qualify because they agreed to sell specified volumes, and Merck was essentially using the discount as a marketing tool (Rubenstein/Johnson, Wall Street Journal, 2/8).
In addition, the plaintiffs claim that Merck paid physicians so-called consulting or training fees, which were actually kickbacks for prescribing Zocor and Vioxx (Finch, New Orleans Times-Picayune, 2/8). The lawsuit examined violations from 1997 to 2001 at 600 to 800 hospitals nationwide, according to Assistant U.S. Attorney Viveka Parker and Virginia Gibson, chief of the office's civil division.
Merck in a statement did not admit wrongdoing but said that the lawsuit was a result of a misunderstanding of complex Medicaid rules. Merck said that in 2001 the company implemented new rules for its sales force to prevent such activity from occurring (Stark, Philadelphia Inquirer, 2/8).
Merck will pay $399 million to settle the lawsuit, with $218 million paid to the federal government and $181 million to the 49 states and Washington, D.C. For the second lawsuit, which involved similar allegations for Pepcid and was originally filed in Louisiana in 1999, Merck will pay $250 million, divided among the federal government and the same 49 states (Wall Street Journal, 2/8).
Merck spokesperson Ronald Rogers said, "What we have here is a disagreement (over) the rules of the Medicaid rebate program," adding, "At the time that these pricing programs were in place, Merck believes that it acted in good faith and complied with the regulations that were in place at the time." Rogers continued, "These civil settlements were the best and most appropriate way to resolve these lengthy investigations" (AP/Houston Chronicle, 2/8).
U.S. Attorney General Michael Mukasey said that the settlement represents "one of the largest health care fraud settlements ever achieved by the Justice Department" and that the government will "hold drug companies accountable for devising pricing schemes that deliberately seek to deny federal health care programs the same lower prices for drugs that are available to other commercial customers" (Cohen, Newark Star-Ledger, 2/8).
ABC's "World News" on Thursday reported on the settlement. The segment includes comments from U.S. Attorney Patrick Meehan and attorney Mark Kleiman, who represents the whistleblower in the case (Thomas, "World News," ABC, 2/7).
Video of the segment and expanded ABC News coverage are available online.
NPR's "Morning Edition" on Friday also reported on the settlement (Montagne, "Morning Edition," NPR, 2/8).
Audio of the segment is available online.