While hospitals were not named as defendants in a whistle-blower lawsuit against drugmaker Merck & Co., some may face potential legal scrutiny for accepting free samples and steep drug discounts in exchange for preferential treatment on hospital drug formularies, health lawyers said.
Nevada Attorney General Brian Sandoval intervened April 25 in a civil lawsuit filed against Merck the week before in state court in Carson City. The complaint alleges that Merck failed to report to Nevada Medicaid steep discounts it offered hospitals for its pain reliever drug Vioxx and its cholesterol drug Zocor.
The Medicaid Rebate Act requires drug companies to report to Medicaid the best prices given to any customers, except when they discount the drugs by 90%. That "nominal pricing" exception was intended to benefit charitable institutions treating disproportionately large numbers of poor and uninsured. However, according to whistle-blower attorneys Steve Cohen and Mark Kleiman, who represent H. Dean Steinke, a former Merck sales manager who filed the suit, Merck abused the exception. Steinke's lawsuit alleges Merck illegally discounted prices to at least 738 hospitals, many of which didn't deserve the "charitable institution" status.
"Merck was virtually giving away Zocor to hospitals so that they would exclusively prescribe Zocor for their chronic heart disease patients," the lawsuit alleged. In a 1999 sales memo, Merck explained hospitals could receive a 92% discount on Zocor if they achieved a 70% market share for that drug. Steinke and the attorney general allege those discounts were not reported to Nevada Medicaid, causing it to overpay for the drugs by millions of dollars. Merck voluntarily pulled the drug from stores earlier this year.
Merck spokesman Chris Loder would not comment other than to say Merck believes its pricing practices are consistent with the law.
While saying there is no evidence of hospital wrongdoing, Kleiman said, "If I were a hospital risk manager I would be nervous about how heavily my hospital pharmacy director may have leaned on medical staff to switch patients onto Vioxx and would wonder how many of those patients switched had cardiac incidents and how soon lawyers figure out the role that my hospital may have played in achieving that switch."