Merck will pay $671M to settle Medicaid overcharge cases

From: Associated Press

Merck (MRK) has agreed to pay a combined total of $671 million to settle claims that it overcharged Medicaid programs for two big-selling drugs, Vioxx and Zocor, and to resolve allegations of improper marketing to doctors, U.S. prosecutors and company officials announced Thursday.

The settlement with Merck resolves allegations that the company paid improper inducements to doctors to prescribe the cholesterol drug Zocor and the painkiller Vioxx.

Drug companies are required to report to the government the lowest price for its product to ensure that Medicaid programs get the benefit of the same discount. Merck, however, was hiding the steep discounts it gave to hospitals by reporting higher prices to the government, prosecutors said.

From 1997 to 2001, Merck also gave money and perks to doctors and other health care professionals to entice them to prescribe Merck drugs, a practice the government called excessive.

In a case in Philadelphia, Merck agreed to pay $399 million plus interest for improper calculation of Medicaid rebates and its marketing practices. In a Louisiana case, it agreed to pay $250 million plus interest for its rebate practices.

Merck said the settlements do not constitute an admission of any liability or wrongdoing.
The Louisiana case involved pricing for the heartburn drug Pepcid when it was sold only with a prescription. The Philadelphia case, which involved a related Nevada action, involved pricing programs for the cholesterol drugs Zocor and Mevacor and the painkiller Vioxx, which was pulled from the market in September 2004.

"What we have here is a disagreement (over) the rules of the Medicaid rebate program," said Merck spokesman Ronald Rogers. "These civil settlements were the best and most appropriate way to resolve these lengthy investigations and bring these matters to closure." "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," he said.

When Merck reported its fourth-quarter financial results Jan. 30, they included a $671 million charge for the anticipated resolution of federal and state civil probes into past sales and marketing practices.

"The company has been working with federal and state authorities and has been making progress toward definitive agreements" to resolve the matters, the earnings report said.

The only state not involved in the settlement is Arizona.

U.S. Attorney Patrick Meehan was joined at the news conference by officials with the Department Of Health and Human Services Office of the Inspector General and representatives of state Attorneys General in Delaware, Illinois, Massachusetts and Nevada.