TRENTON (AP) — Merck will pay $671 million to settle claims it overcharged government health programs for four popular drugs and gave doctors fees and gifts to induce them to prescribe its drugs, federal prosecutors and company officials said Thursday.
The overcharges, dating back to the mid-1990s, involved Medicaid programs in all but one state and the District of Columbia, as well as federal health insurance programs at agencies including the Public Health Service and the Departments of Defense and Veterans Affairs.
A nationwide investigation by federal prosecutors, prompted partly by a former Merck salesman who turned whistle-blower and a Louisiana doctor who exposed part of the suspected overcharging, resulted in two settlements announced Thursday.
In Philadelphia, federal prosecutors said Merck agreed to pay $399 million and interest for improper calculation of Medicaid rebates and its marketing practices. And in New Orleans, the United States attorney’s office said the drug maker agreed to pay $250 million and interest for its rebate practices.
The interest payments increase the total payout to $671 million, Merck said.
The company said the settlements did not constitute an admission of any liability or wrongdoing.
A Merck spokesman, Ronald Rogers, called the case “a disagreement” over the rules of the Medicaid rebate program. “These civil settlements were the best and most appropriate way to resolve these lengthy investigations and bring these matters to closure,” he said.
Drug companies are required to report to the government the lowest price for their medicines to ensure that Medicaid programs get the benefit of discounts or rebates on the drugs they buy. Prosecutors said Merck was hiding the steep discounts it gave to hospitals that used a set amount of Merck products and was reporting higher prices to the government.
From 1997 to 2001, prosecutors said, Merck also gave money and perks to doctors and other health care professionals to entice them to prescribe Merck drugs, a practice the government called excessive.
The Philadelphia case involved pricing programs for the cholesterol drugs Zocor and Mevacor and the painkiller Vioxx, which Merck withdrew from the market in September 2004 because it doubled risk of heart attack and stroke. Those programs ran from 1996 through 2006, Mr. Rogers, the Merck spokesman, said.
The Louisiana case involved pricing for the heartburn drug Pepcid from mid-1996 to April 2001, when it was still sold as a prescription drug.
“At the time that these pricing programs were in place, Merck believes that it acted in good faith and complied with the regulations that were in place at the time,” Mr. Rogers said.
When Merck reported its fourth-quarter financial results on Jan. 30, they included a $671 million charge for the anticipated resolution of federal and state civil investigations into past sales and marketing practices.
At the time, lawyers for Merck, federal prosecutors and Senior Judge Louis H. Pollak of Federal District Court in Philadelphia were meeting weekly to shape the final agreement.
