Schering-Plough Faces Probe of Pricing Practices
Pharmaceutical company Schering-Plough Corp. admitted in a filing to the Securities and Exchange Commission that state and federal investigators have begun probing the company's drug marketing practices as part of a larger criminal inquiry into the industry, the Wall Street Journal reports. Investigators, led by federal prosecutors in Boston, have questioned whether Schering-Plough created "unlawful inflation" of government reimbursement for certain drugs. In addition, they will explore whether the firm "shorted" Medicaid on payments "designed to ensure that the government pays the lowest price for drugs." Schering-Plough spokesperson Robert Consalvo said, "The company is cooperating with these investigations" (Cloud, Wall Street Journal, 3/14). Samantha Martin, a spokesperson for the U.S. Attorney's office in Massachusetts, would not "confirm or deny" the investigation (Krauskopf, Bergen Record, 3/14). According to the Journal, Schering-Plough may have used a practice called "repackaging" to reduce required Medicaid payments. Drugs are often sold in bulk at "steep discounts" to HMOs and then repackaged into "more convenient doses" for HMO doctors. By not reporting the low prices to Medicaid, firms "lower the amount they have to remit" to the program every quarter -- a violation of a 1990 law that requires manufacturers to report "best prices" for drugs. While industry lawyers argue that the law does not apply to HMO repackaging deals, a Boston grand jury has heard evidence involving Schering-Plough's repackaging operations, the Journal reports. Investigators are also examining whether the company reported inflated average wholesale prices used as a benchmark by the government to set Medicaid reimbursement rates, and then sold those drugs at discounts to providers to make the drugs more competitive -- improperly driving up Medicaid reimbursements (Bergen Record, 3/14).