Merck To Pay $671 Million in Fraud Settlement

Merck has agreed to pay more than $671 million to settle allegations of fraud concerning Medicaid and other public healthcare programs across the U.S., according to a federal Settlement Agreement. According to qui tam lawyers Steven H. Cohen, Mark Kleiman and BethAnne Yeager, Merck employed four marketing tactics to maintain market share for drugs including Vioxx, Zocor, Cozaar, Fosamax, Maxalt, and Singulair. This practice known as “nominal pricing” concerned discounts on drugs allegedly offered to certain customers but not to Medicaid. The suit alleged Merck offered discounts of 90% or more on Zocor, Mevacor and Vioxx to hospitals that helped Merck achieve market-share goals, and that it improperly gave doctors incentives to use the products.
   
Merck said it had taken the initiative to enhance its compliance program in 2001, and that the pricing allegations resulted from interpretation of Medicaid rules. “We believe this is the best and most appropriate way to resolve these lengthy investigations,” said a Merck spokesman. The settlement allocates $218 million to the federal government and $181 million to 49 states and the District of Columbia. The costs and a separate $250 million settlement in a Louisiana rebate case brought the total to $671 million. The investigation among federal and state authorities and the qui tam legal team lasted seven years.
   
H. Dean Steinke, a former Merck district sales manager, who filed a so-called whistleblower suit under the False Claims Act in U.S. District Court for the eastern district of Pennsylvania in 2000, and filed a separate suit in Nevada in 2005 — alleging both pricing and kickback schemes — will receive $68.2 million from the settlement.
   
Although Merck did not admit to the allegations, in addition to the settlement, the company has agreed to a Corporate Integrity Agreement, according to Mr. Cohen, who, along with Ms. Yeager is associated with the Whistleblower Action Network in Chicago.     
   
“Our relator, a former Merck sales manager, blew the whistle on Merck which resulted in a nationwide investigation by federal and state prosecutors that returned hundreds of millions of taxpayer dollars to the Medicaid program,” Mr. Cohen said.
   
“When we realized the extent of the fraud, we took the evidence straight to the Government. Taking on Merck required close coordination and cooperation between us and the state and federal prosecutors. This taskforce approach and unrelenting commitment won a huge victory for the taxpayers.” Mr. Kleiman said.
   
“This landmark case exposed abuses of Medicaid’s Best Price nominal price exception, and strengthened the Medicaid Rebate program to reduce the states’ drug costs,” Ms. Yeager said.