~ McCollum’s new civil enforcement bureau helps negotiate settlements
resolving allegations that Merck failed to pay rebates due to state
Medicaid programs ~
TALLAHASSEE, FL – LAWFUEL – Attorney General Bill McCollum today announced that Florida will receive a total of $32.8 million as part of two separate global settlements totaling $649 million with Merck & Co., Inc. The settlements resolve allegations that the company failed to pay rebates for at least three prescription drugs due to state Medicaid Programs under the Federal Medicaid Drug Rebate statute. Florida’s civil case was handled by the Attorney General’s Complex Civil Enforcement Bureau (CCEB) and the Orlando Bureau of the Medicaid Fraud Control Unit. The multi-state settlement is the first major case completed by the CCEB since its creation in May 2007.
“This is a significant recovery for our Medicaid program and the State of Florida,” said Attorney General McCollum. “We are sending a clear message to pharmaceutical companies that Florida will not tolerate profit-driven or creative interpretation of rules governing drug marketing programs.”
The Florida state Medicaid program will receive $12 million from the settlements. The remaining funds will be distributed to the Federal Medicaid program. In addition to Florida, 48 states, the District of Columbia and the Federal Government participated in the settlements, which also resolve three claims filed by whistleblowers in federal court.
Merck is the manufacturer of the prescription medications Zocor, a cholesterol-lowering drug; Vioxx, a non-steroidal anti-inflammatory which has since been pulled from the market; and Pepcid, a drug used to treat stomach and intestinal ulcers. Pharmaceutical manufacturers that supply these and other products to Medicaid recipients are required by the Federal Medicaid Drug Rebate law to give the Medicaid programs the benefit of the “best price,” or lowest price, available for those products. The best price information is used to calculate rebates these manufacturers must pay to the state Medicaid programs. The investigation led by the states and the federal government alleged that the best prices were not being accurately reported and therefore the required rebates were not being paid to the states.
The two whistleblower cases which were pending in Pennsylvania and Nevada involved two Merck discount programs where Merck attempted to use a “nominal price” exemption instead reporting the best prices for the prescriptions Zocor and Vioxx. Prices that are considered “merely nominal”
are exempted from the reporting requirement but should not be tied to any conditions. Each discount program was based on an agreement that Merck would sell the drugs to hospitals at a 92 percent discount from the catalog price only if the hospitals reached certain market shares for the drugs. Because the discounts had conditions attached, the states contended that the resulting discounted prices were not merely nominal and should have been reported. By failing to do so, Florida and the other states claimed that Merck deprived the state Medicaid programs of deserved rebates.
An additional case pending in Louisiana involved Merck’s drug Pepcid and its associated discount plan. Under this program, Merck sold various forms of Pepcid to hospitals in bundled pricing arrangements. If the hospitals met a certain market share or other purchase requirements, Merck provided Pepcid tablets at discounts ranging up to 92 percent and made lesser discounts available on other variations of Pepcid. According to the government, the transactions under this programs required Merck to adjust its best price among the different formulations to reflect these discounts. Because Merck failed to reflect these discounts in its best price reports, fewer rebates were allegedly paid to the state Medicaid programs.
In addition to the monetary recovery, Merck has entered into a corporate integrity agreement with the United States Department of Health and Human Services’ Inspector General. The agreement will include provisions that will ensure that Merck will market, sell and promote its products in accordance with all Federal health care program requirements.
Merck had begun voluntary compliance initiatives associated with its sales and marketing activities prior to learning of the investigation into the conduct associated with these settlements.
The Attorney General’s CCEB, which is part of the Medicaid Fraud Control Unit, is tasked with investigating and litigating multi-state cases involving false claims for payments that are submitted to the Florida Medicaid program. The bureau works primarily with “Qui Tam” or whistleblower actions brought pursuant to the Florida False Claims Act, which was amended in 2007 to bring Florida into compliance with the Federal False Claims Act. This law allows the Attorney General’s Medicaid Fraud Control Unit to recover triple damages in civil lawsuits against those who commit Medicaid fraud.