Feds accuse pharmacy benefit firm of favoring Merck drugs

David B. Caruso

Tuesday, June 24, 2003 | 9:42 a.m.

PHILADELPHIA -- Federal attorneys on Monday said a company that was supposed to help health plans find low-cost prescription drugs instead pressured doctors to switch patients to medications made by its owner, pharmaceutical giant Merck & Co.

U.S. Attorney Patrick Meehan said his office has joined a pair of civil "whistleblower" lawsuits against Medco Health Solutions, accusing the Merck subsidiary of providing misleading information to the government in connection with its contract to manage drug benefits for federal employees.

More than 1,000 companies have hired Medco to coordinate prescription drug coverage for employee health plans, making it the nation's largest manager of pharmacy benefits, and the company is supposed to use its bulk-purchasing power to lower drug costs.

But the suits say Medco routinely induce physicians to switch patients to Merck drugs, even if a patient had been doing well on another medication that cost less.

The government also says the company failed to call doctors to explain prescriptions that were unclear, and fabricated records to make it appear as if calls from pharmacists to physicians had been made.

The three whistleblowers -- a New Jersey doctor and two Nevada pharmacists who once worked for Medco -- claim the firm also misled clients about its practice of accepting cash rebates from pharmaceutical companies in exchange for promoting their products. The suits claim the payments amount to kickbacks.

Medco spokesman Jeffrey Simek said the charges are "either absolutely untrue, or they reflect years-old isolated issues that were identified and corrected."

He denied the firm gives preferential treatment to Merck, or any other drug company.

"Our policy is that we will never make a drug interchange that will not result in a benefit for either our clients, or the members of their health plans," he said. "If we improperly favored any drug by any single company, we could never succeed."

Several health plans have previously sued Medco, claiming that it improperly accepted $3.56 billion in payments from drug companies in the late 1990s to promote their products, but Monday's filing by the U.S. Attorney in Philadelphia is the first such action by a federal prosecutor.

Medco, like other pharmacy benefit companies, acknowledges participating in rebate programs. Simek said the company took in $2.5 billion in rebates in 2001. But he said the payments work like coupons and ultimately lower medication costs for clients.

The suits also accuse Medco, of Franklin Lakes, N.J., of shortchanging patients by mailing them fewer than the number of pills they paid for. They say the company tried to avoid penalties for delays in filling mail orders by destroying prescriptions on days when the order volume was heavy.

Simek said the company investigated the allegations and determined they were isolated incidents that didn't affect patient care. Two employees were fired, he said.

Court filings identified the whistleblowers as Dr. Joseph Piacentile, of New Jersey, and George Bradford Hunt and Walter W. Gauger, two pharmacists who previously worked for Medco in Las Vegas.

Attorneys general in several states have said they are also investigating whether the company, and other pharmacy benefit firms, broke the law.

Merck has been trying to spin off its Medco business. It canceled an initial public offering for the company in July after revealing that it had misstated its revenues by $12 billion in recent years by counting prescription copayments made to pharmacies as Medco revenue. Merck said in May that the firm would be spun off instead to Merck shareholders.