Lilly, O'Toole & Brown Blog

Merck Settles Overbilling Lawsuits: $671 Million

Merck has agreed to settle two lawsuits which alleged overcharging Medicaid for Vioxx, Zocor, and Pepcid.  The settlement total is $671 million, which includes a $399M payment to the plaintiffs, $218M to the federal government, and $181M to 49 states and District of Columbia.

In the lawsuits, which were filed in Pennsylvania in 2000 and Nevada in 2005, a former Merck employee alleged that the company provided the drugs to hospitals at a discount of greater than 90% if the hospitals would help the company reach its market-share goals.  The plaintiffs in the suit contended that this practice constituted an unfair incentive for physicians to prescribe the drugs.

Federal law mandates that drug manufacturers have to offer sales to Medicaid at a price at least as low as they offer them to any other customer.  However, because drugs sold at discounts of greater than 90% do not have to be disclosed to the government, Merck was able to get away with this scheme for years.

A second claim of the lawsuit was that Merck was paying physicians a "consulting fee" or "training fee," which were actually nothing more than illegal kickbacks for prescribing Merck products.  This practice, according to the Assistant U.S. Attorney's on the case, was in place from 1997 - 2001 at as many as 800 hospitals across the country.

Deep discounting and kickbacks on the part of drug companies, apart from being illegal, are very dangerous to patients.  When the drug companies create a situation where the physician's judgment can be clouded by dollar signs, it puts patients at risk.  Attorney General Michael Mukasey has called the settlement "one of the largest health care fraud settlements ever achieved by the justice department."  Hopefully this settlement will serve as an example to other drug companies how might otherwise consider implementing such a scheme.