Nevada Attorney General Brian Sandoval announced today that he would intervene in a whistleblower fraud lawsuit filed against pharmaceutical giant Merck & Co., involving allegedly improper discounts to hospitals. The attorney general alleges that Merck failed to report to Nevada Medicaid steep discounts it offered to more than 700 hospitals, including some in Nevada, for its pain-reliever drug Vioxx and its cholesterol drug Zocor in violation of the Medicaid Rebate Act.
That law requires pharmaceutical manufacturers to report to Medicaid the best prices given to any customers, except when drugmakers discount the drugs by 90%. That loophole, known as "nominal pricing," was intended to be benefit not-for-profit charitable institutions, such as public hospitals and those treating disproportionately large numbers of poor and uninsured.
But according to the whistleblower attorneys Steve Cohen of Chicago and Mark Kleiman of Los Angeles, who represent former Merck employee H. Dean Steinke who filed the suit last week in Nevada state court in Carson City, Merck illegally abused that exception. In Steinke's lawsuit unsealed this week, he alleges that Merck illegally discounted prices to hospitals that didn't deserve the "charitable institution" status, including 47 HCA hospitals and 33 hospitals operated by Tenet Healthcare Corp.
To build market share and fight increased competition from Pfizer's rival cholesterol drug, Lipitor, "Merck was virtually giving away Zocor to hospitals so that they would exclusively prescribe Zocor for their chronic heart disease patients," according to the 26-page complaint.
In a 1999 Merck sales memo obtained by Modern Healthcare, Modern Physician's sister publication, the company explained that through its SAVE program, hospitals could receive a 92% discount on Zocor if they achieved a 70% market share for that drug within the hospitals. Steinke and the attorney general allege those discounts were not reported to Medicaid, causing it to overpay for the drugs by millions of dollars.
Merck spokesman Chris Loder said the company has not yet seen the complaint and would not comment. However, Loder said Merck "believes all of its pricing practices are consistent with the law."