Merck To Pay $670 Million Over Medicaid Fraud
12 CommentsBy Ed Silverman // February 7th, 2008 // 12:10 pm
The drugmaker failed to pay the appropriate rebates to Medicaid and other goverment health care programs, and also paid kickbacks to doctors and hospitals to induce them to prescribe various meds. The allegations were brought in two separate lawsuits filed by whistleblowers under the False Claims Act. Merck has also agreed to a Corporate Integrity Agreement, which means good behavior is now required for the next five years.
“Not only is the combined recovery in these two cases one of the largest healthcare fraud settlements ever achieved by the Justice Department,” says Attorney General Michael Mukasey, in a statement, “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.” Here is the statement from Merck, which signaled this deal two months ago by discussing a $670 million charge to cover investigations into Medicaid marketing.
The Medicaid Rebate Statute requires drugmakers to report their “best prices” and other pricing info to the government in order to ensure Medicaid obtains the same discounts and concessions given other customers. An exception to this rule allows drugmakers to exclude from the prices they report any discounted prices that are “nominal” in amount. Merck improperly termed as “nominal” the prices it offered to hospitals to boost their sales and excluded those discounts from the prices it reported to the government, according to the Justice Department.
H. Dean Steinke, a former Merck district manager in Michigan, alleged in his suit filed in Philadelphia that Merck violated the statute in connection with its marketing of Zocor, Mevacor and Vioxx. Merck allegedly offered deep discounts for the drugs if hospitals used large quantities in place of rival brands. The whistleblower walks away with $68 million.
Here’s a timeline that traces the origins and development of the case…
Steinke’s suit further alleged that from 1997-2001, Merck had approximately 15 different programs used by its sales reps to induce docs to prescribe i ts drugs. These programs primarily consisted of excess payments to dcos that were disguised as fees paid to them for “training,” “consultation” or “market research.” In fact, the government alleged that these fees were illegal kickbacks intended to induce the purchase of Merck drugs. Merck agreed today to pay $399 million plus interest to settle the Medicaid Rebate as well as the kickback allegations.
In a separate suit filed by physician William St. John LaCorte in New Orleans, Merck was charged with creating a marketing scheme in which it provided substantially reduced prices for the Pepcid heartburn med once hospitals agreed to primarily use the drug instead of a rival pill. Merck allegedly offered these incentives to hospitals in order to obtain spillover business when patients would continue to purchase Pepcid once he or she was discharged.
Merck improperly termed as “nominal” the prices it offered to hospitals to boost Pepcid sales, excluded those discounts from the prices it reported to the government, and thus effectively denied the government the benefit of these lower prices. Merck agreed today to pay $250 million plus interest to settle these allegations.
Under the two settlement agreements, the federal government will receive more than $360 million, and 49 states and Washington, DC, over $290 million. The interest brings the payout from $650 million to about $670 million. In addition, Steinke will receive $44.7 million from the federal share of the settlement amount and an additional $23.5 million from the states. Similarly, Dr. LaCorte will receive a share of the proceeds from the federal and state settlement amounts under their respective qui tam statutes.
“Our health insurance programs rely upon the integrity of health providers, including pharmaceutical manufacturers, when they report to the government programs which reimburse their products and services with scarce funds,” says Pat Meehan, the US Attorney in Philadelphia, whose office led the investigation of the Steinke suit.
Doc
Good for Steinke!!!! $69 million dollars to the true hero, the whistleblower. Big pharma’s greed knows no ends, hopefully these heros will keep them reined in.
www.worldpharmanews.net
Pharmalot » Merck To Pay $670 Million Over Medicaid Fraud…
The drugmaker failed to pay the appropriate rebates to Medicaid and other goverment health care programs, and also paid kickbacks to doctors and hospitals to induce them to prescribe various meds. The allegations were brought in two separate lawsuits f…
Hypocrisy rules
The mighty and “clean” Merck has follen. Who is next? One of the big ones that has managed to evade the bloodhounds is the mighty Novartis. Apparantly teflon can not be tracked by these noble animals? For how long?
Matt
There is no end to Big Pharma corruption…
BPW
The statement issued by merck after the agreement is disgusting.
“Merck believes its pricing and sales and marketing policies and practices were consistent with all applicable regulations and contracts during the relevant time. ”
How in the world can they have the audacity to say this? becuase they’re Big Pharma and that’s the way it works! The lawyers for the company negotiate a monetary settlement which amount to pennies on the dollar for the company, admits no wrongdoing and absolves its’ executives of any prosecution. This has been seen over and over and over again. The fine is paid out of the stockholders pockets and the execs get away completely free. Until they are held accountable for their misdeeds, this crap will never stop. next will be Lilly with its’ billion dollar fine for pushing Zyprexa to people that didn’t need it and causing God knows what problems in those patients. They’ll also no doubt settle claiming no wrongdoing and protecting their stupid unethical executives. White-collar crime rules in Big Pharma!
Chris
Isn’t time for Merck to just close up shop. Has there ever been a company in American history that went from the apex in terms of science and integrity to the gutter in such a short period of time. I have worked in pharma for almost 20 years and until VIOXX I was one of the many who truly looked up at Merck even over my own employer. But now I see the work Merck and I am disgusted. Merck came to represent the best of the industry and now Merck is the poster child of everything that is wrong with it. And sadly like the company that I work for myself, Merck is full of people working hard trying to do the right thing. It is the leadership of Merck that is dragging it to the bottom. Desperate greedy people lacking any integrity trying to pull as much from a sinking ship as they can before they jump. The work Merck genuinely sickens me.
chasley
hey chris, why are you still part of the industry if you are so sickened? you don’t seem to mind taking your part of the take of the horrible drug industry take do you? the fat and lazy american public are the ones who are enabling this problem. they would prefer to take the easy way out of their problems. i can just take a pill, i don’t need to make any effort at all to change my lifestyle. that is the attitude that makes this all possible. you people are just jealous that you are not cashing in on this weakness in the usa and other parts of the so called advanced societies.
Chris
Hi Ed,
This might not concern anybody but me but there are two people using the name Chris on here and we have different views on some things, such as this. As I said before, I type in an English accent but that might not be enough to differentiate us… Perhaps you could decide and inform which one of us should change our pharmalot name.
Chris
Chris -
Actually I think there may be 3 or more people posting under Chris. Just change the name YOU are using - add an initial or something.
Andy
Let’s hope Gov. Corzine will use his piece of this settlement for dedicated funds to Medicaid and NOT the general treasury. What ever happened to the tobacco settlement funds for healthcare?
ol cranky
Chris:
Actually, the revelation that SKF/GSK may have obfuscated data about suicidality in the paxil trials may surpass Merck’s tumble in reputation. I’ve always found Merck to be a very arrogant company, even well before the VIOXX debacle (though I was absolutely shocked that Merck would have acted as they did). The downfall of GSK stems directly from the merger of Glaxo and SmithKline. I had worked with (not for) Glaxo prior to the merger and found that their trials and research practices seemed to be designed and managed to err on the side of safety. Much of what I learned from this has impacted how I handle my role in development and design/manage programs. SKF on the other hand, always seemed to be like a Merck wannabe and, as the mishandling of paxil data was set up and entrenched in the SKF days.
The constant mergers of big companies to make supercompanies that only develop blockbusters (and for whom even a $1B settlement is just the cost of business) has hurt consumers (patients), the industry, the medical community (due to overall decrease in development) and the economy. Maybe it’s time to break up “Ma Bell” and limit merger/acquisition activity.
CHASELY: correct me if I’m wrong, but are you saying that the only reason industry insiders complain about lack of compliance to outright fraud is because we’re jealous that we’re not getting the financial gain executives have by violating regulations? You really seem to be presenting 2 options to us: stop complaining and join in; or get out and shut up. I’m sure I’m not the only “complaining” who has paid a hefty penalty by trying to correct things and improve compliance while diligently working towards the development of what I hope will be the more efficacious treatments with better safety profiles that we need. Now if you want me to get out instead of trying to get the companies to be responsible and take corrective action, how about paying my mortgage and/or giving me a job that suits my qualifications? And another thing, I don’t want to hear a word of complaint if/when someone you love can’t afford treatment/has a less than acceptable response to the limited treatments available/is given a medication they should not be taking.
Simon Passanante - Merck will pay $670 million to settle Medicaid fraud claims
[...] to a Corporate Integrity Agreement which means good behavior is required for the next five years. Pharmalot has more on the settlement as well as a timeline that traces the origins and developments of the [...]