Press Releases
MEDIA FACT SHEET: MERCK TO PAY $250 MILLION TO SETTLE CLAIMS OF FRAUDULENT PRICE REPORTING IN EASTERN DISTRICT OF LOUISIANA
February 7, 2008
FOR IMMEDIATE RELEASE
As part of the $650 million settlement which Pharmaceutical giant MERCK & COMPANY has agreed to pay to resolve civil liabilities for failing to pay proper rebates to Medicaid and other government health care programs, among other acts addressed in two separate law suits filed under the False Claims Act, MERCK will pay $250 million to resolve one of the two civil actions filed here in the Eastern District of Louisiana, announced U. S. Attorney Jim Letten.
The investigation in the Eastern District of Louisiana began with allegations that were brought to the attention of the U. S. Attorney’s Office in New Orleans and the Justice Department by a whistleblower in a lawsuit brought under the qui tam provisions of the False Claims Act. Dr. William St. John Lacorte, a local physician, alleged that MERCK had established a marketing scheme in which it provided deeply discounted prices (as much as 92% off of its Average Manufacturer’s Price for Pepcid tablets and lesser discounts for other Pepcid formulations) for its Pepcid products once hospitals agreed to primarily use Pepcid instead of competitor drugs. The Medicaid Rebate Statute requires that drug manufacturers report their “best prices” and other pricing information to the Government in order to ensure that Medicaid – the federal and state health care program for the poor – obtains the benefit of the same pricing discounts that other purchasers enjoy. An exception to this rule allows manufacturers to exclude from the discounts they report any deeply discounted prices that are “nominal” in amount. MERCK improperly termed as “nominal” the prices it offered to hospitals to boost their sales and excluded those discounts from the prices it reported to the Government, effectively denying to the Medicaid program the benefit of these lower prices. The settlement resolves civil liability under the False Claims Act for MERCK’S conduct, which spanned from mid-1996 through mid-2001, when Pepcid went off-patent and MERCK ended the marketing program.
The Department of Health and Human Services (HHS) Office of Inspector General (OIG), the Medicaid Fraud Control Unit of the Louisiana Attorney General’s Office and representatives of the National Association of Medicaid Fraud Control Units participated in the investigation.
The United States Medicaid Trust Fund and other federal health insurance programs will receive $137,500,000 plus interest and the 49 states with Medicaid programs and the District of Columbia will share $112,500,000 plus interest. The whistleblower will receive a share of the federal and state settlement amounts under their respective qui tam statutes. Dr. LaCorte’s share of the settlement has not been determined.
The total portion recovered that is attributed to Louisiana is: $5,784,888. Each state that participates in Medicaid has to fund a portion of Medicaid healthcare costs and the federal government funds the remaining portion. Out of Louisiana reimbursement (the $1,489,693), a portion will go to the Louisiana Joint Fraud and Abuse Detection Fund. So the $5,784,888 represents both the Louisiana federal and state shares of the overall settlement amount. Of that total $5,784,888, Louisiana will be reimbursed $1,489,693 (that will come out of the total state portion of $112,500,000) and the balance of $4,295,195 will be reimbursed to the federal Medicaid Trust Fund.
Department of Justice Attorney Sanjay Bhambhani and Assistant United States Attorney Sharon D. Smith handled the civil investigation and settlement negotiations. Artie Delauneville of the Baton Rouge office of HHS OIG participated in the investigation. Mary Riordan of the Office of Counsel to HHS OIG negotiated the Corporate Integrity Agreement with MERCK.
