Pharmaceutical giant Merck & Co. has agreed to pay over 650 million dollars to resolve allegations of fraudulent drug pricing and improper kickbacks, the US Justice Department announced Thursday.
The settlement hinged on two separate lawsuits relating to claims that Merck failed to pay proper rebates to government health care programs and that it made illegal payments to health care providers as inducements to use Merck products.
Attorney General Michael Mukasey said the accord marked "one of the largest healthcare fraud settlements ever achieved by the Justice Department."
"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," Mukasey said.
The settlement was partly based on a whistleblower lawsuit brought by former Merck employee, H. Dean Steinke, who claimed that the pharmaceutical firm violated the Medicaid Rebate Statute in connection with its marketing of Zocor and Vioxx.
Zocor is a cholesterol lowering drug. Vioxx was used to treat acute pain and in the treatment of arthritis and was withdrawn from the market by Merck in September 2004.
Steinke's lawsuit alleged that Merck offered deep discounts for the two drugs if hospitals used large quantities of the drugs instead of rival treatments produced by Merck's competitors.
The Medicaid Statute requires drug manufacturers to report their "best prices" and other pricing information to the government in order to ensure that Medicaid, a government health care scheme, benefits from the same discounts and pricing enjoyed by other drug purchasers.
The government said, however, that Merck improperly did not fully reveal discounted prices it had offered to hospitals to boost its sales.
The New Jersey-based drugmaker confirmed separately that it had reached a settlement with the government and state authorities in the cases.
"The settlements do not constitute an admission by Merck of any liability or wrongdoing," Merck said in a statement.
The firm's general counsel and executive vice president, Bruce Kuhlik, said: "We have taken and will continue to take a leadership position in restoring trust in this industry and in ensuring that our interactions with healthcare professionals support the care of patients and further the public health."
Merck's stock closed a scant one cent lower at 45.70 dollars in the wake of the announcement amid wider market gains.
Steinke also claimed that Merck between 1997 and 2001 ran different schemes aimed at inducing doctors to use its drugs.
The whistleblower lawsuit claimed Merck sought to give doctors excessive payments disguised as fees paid to them for "training," "consultation" or "market research."
The Justice Department claimed these fees were "illegal kickbacks" intended to induce the use of Merck drugs.
A separate lawsuit filed by a New Orleans doctor, which also formed part of the overall settlement, alleged that Merck ran a marketing scheme which offered substantially reduced prices for its Pepcid products once hospitals agreed to use the drug instead of a competitors.
Pepcid is used to reduce stomach acid and to treat heartburn and acid reflux.
The government will receive 360 million dollars under the accord while 49 states and the District of Columbia will receive over 290 million dollars.
Steinke will receive over 64 million dollars from the settlements under government whistleblower laws.
The settlement hinged on two separate lawsuits relating to claims that Merck failed to pay proper rebates to government health care programs and that it made illegal payments to health care providers as inducements to use Merck products.
Attorney General Michael Mukasey said the accord marked "one of the largest healthcare fraud settlements ever achieved by the Justice Department."
"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," Mukasey said.
The settlement was partly based on a whistleblower lawsuit brought by former Merck employee, H. Dean Steinke, who claimed that the pharmaceutical firm violated the Medicaid Rebate Statute in connection with its marketing of Zocor and Vioxx.
Zocor is a cholesterol lowering drug. Vioxx was used to treat acute pain and in the treatment of arthritis and was withdrawn from the market by Merck in September 2004.
Steinke's lawsuit alleged that Merck offered deep discounts for the two drugs if hospitals used large quantities of the drugs instead of rival treatments produced by Merck's competitors.
The Medicaid Statute requires drug manufacturers to report their "best prices" and other pricing information to the government in order to ensure that Medicaid, a government health care scheme, benefits from the same discounts and pricing enjoyed by other drug purchasers.
The government said, however, that Merck improperly did not fully reveal discounted prices it had offered to hospitals to boost its sales.
The New Jersey-based drugmaker confirmed separately that it had reached a settlement with the government and state authorities in the cases.
"The settlements do not constitute an admission by Merck of any liability or wrongdoing," Merck said in a statement.
The firm's general counsel and executive vice president, Bruce Kuhlik, said: "We have taken and will continue to take a leadership position in restoring trust in this industry and in ensuring that our interactions with healthcare professionals support the care of patients and further the public health."
Merck's stock closed a scant one cent lower at 45.70 dollars in the wake of the announcement amid wider market gains.
Steinke also claimed that Merck between 1997 and 2001 ran different schemes aimed at inducing doctors to use its drugs.
The whistleblower lawsuit claimed Merck sought to give doctors excessive payments disguised as fees paid to them for "training," "consultation" or "market research."
The Justice Department claimed these fees were "illegal kickbacks" intended to induce the use of Merck drugs.
A separate lawsuit filed by a New Orleans doctor, which also formed part of the overall settlement, alleged that Merck ran a marketing scheme which offered substantially reduced prices for its Pepcid products once hospitals agreed to use the drug instead of a competitors.
Pepcid is used to reduce stomach acid and to treat heartburn and acid reflux.
The government will receive 360 million dollars under the accord while 49 states and the District of Columbia will receive over 290 million dollars.
Steinke will receive over 64 million dollars from the settlements under government whistleblower laws.
