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Merck Settles Health Care Fraud Case for $671 Million

Posted by Jane Akre
Thursday, February 07, 2008 3:20 PM EST
Category: Major Medical, Protecting Your Family
Tags: FDA and Prescription Drugs, Toxic Substances, Medical Malpractice

Drug maker Merck must pay $671 million for health care fraud.


Merck and Co. will pay $671 million to reimburse Medicaid for overcharging for the cost of four drugs including Vioxx and Zocor and to resolve charges of improper kickbacks to doctors.  

The investigation was led by the federal government and several states and resulted from two separate lawsuits.

In Philadelphia, Merck will pay $399 million for improperly calculating Medicaid rebates. In a Louisiana case, it will pay $250 million plus interest for its rebate practices.

“It reflects our continuing effort to 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," U.S. Attorney General Michael Mukasey said.

Drug makers such as Merck, are required to report the lowest price offered so that Medicaid, government health care, receive the same discount. But Merck reportedly did not reveal the discounted prices were available to the government to boost its sales.

Meanwhile Merck charged discounted prices to hospitals that were using large quantities of its drugs over competitors’ brands.  

The revelations came from a whistleblower lawsuit brought by a former Merck employee.  H. Dean Steinke blew the whistle on how the firm violated the Medicaid Rebate Statute in its marketing of the cholesterol drug Zocor and Vioxx.

Vioxx is the arthritis pain drug that was taken off the market in September 2004.

A separate lawsuit filed by a New Orleans doctor claims that Merck offered reduced prices for Pepcid, for heartburn and acid reflux, if the hospital agreed to use the drug. Pepcid was previously sold only with a prescription.

The whistleblower lawsuit also says that Merck enticed doctors by giving them excessive payments called “market research,”  “consultation” or “training”. 

The Justice Department calls them illegal kickbacks.

Altogether, the government receives $360 million while 49 states and the District of Columbia receive $290 million. 

The whistleblower, Steinke will receive over $64 million under government laws that reward people for coming forward.

The settlements do not indicate any admission of guilt, Merck says. But the company will work with the U.S. Department of Health and Human Services to comply with requirements in the future.

A Merck spokesman says there is a basic disagreement about what the rules are for Medicaid rebates. “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,” Ronald Rogers said. 

Upon the news of the settlement Merck’s share dropped two cents to $45.69 Thursday. #


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