Merck & Co. will pay more than $650 million to resolve two whistle-blower lawsuits alleging the company illegally paid providers to use its products and gave hospitals volume discounts for Zocor, Vioxx and Pepcid while failing to extend the prices to Medicaid, the U.S. Justice Department announced.
Attorney General Michael Mukasey said in a written statement that the sumto be split among the federal government, participating states and the District of Columbiais among the largest the department ever received in a settlement.
Former Merck sales manager H. Dean Steinke is set to receive about $68.2 million from the $399 million payout from his lawsuit, which drew the aggressive participation of Nevadas Medicaid Fraud Control Unit in addition to the U.S. Justice Department. The other whistle-blower, New Orleans physician William LaCorte, will receive $24.1 million related to his allegations.
Merck, which admits no wrongdoing or liability in the agreement, disclosed in its fourth-quarter earnings report that it had reserved $670 million for the coming settlement, and a news release issued today says the company believes its pricing and sales and marketing policies and practices were consistent with all applicable regulations and contracts during the relevant time.
Steinke alleged that Merck gave deep discounts on Zocor and Vioxx to hospitals that would agree to use those drugs instead of ones made by Mercks competitors yet didnt give Medicaid the same low prices, as the law requires. Nevadas investigation found that Merck was charging hospitals less than 8% of its reported price on Zocor, according to Nevada Attorney General Catherine Masto. Also based on Steinkes lawsuit, the government concluded that Merck paid physicians kickbacks that were disguised as compensation for training, consulting and market research.
In LaCortes complaint, the physician said he often prescribed Zantac to his patients and discovered later that his order had been converted to Pepcid by hospitals under the pricing arrangement. LaCorte contended, and the government agreed, that the company sought to reap huge rewards when the patients continued to use higher-priced Pepcid after they were discharged. -- by Gregg Blesch
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