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Merck Agrees to $650M Settlement in Medicaid Health Care Fraud Case

Posted Feb 7, 2008 4:30 PM CDT
By Martha Neil

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Without admitting liability, Merck & Co. has agreed to pay a total of more than $650 million to plaintiffs including the federal government, 49 states and the District of Columbia, to settle allegations that the pharmaceutical company engaged in health care fraud by violating Medicaid rules.

The settlement, according to U.S. Attorney General Michael Mukasey, is one of the largest ever obtained in a government health care fraud case, reports CNN/Money, based on information from Dow Jones newswires.

"The major issue involved the misuse of a practice known as 'nominal pricing,' " concerning "deep discounts on drugs Merck allegedly offered to certain customers, but not to Medicaid, the government health-insurance program for the poor," reports the Wall Street Journal. The practice came to light in a whistle-blower suit filed by a former Merck employee, in which the Justice Department and all states except Arizona later joined, the newspaper reports.

Under the settlement announced today, Merck is to pay $218 million to the federal government, $181 million to 49 states and the District of Columbia, and $44.7 million to the former employee. The company also announced a settlement of $250 million to resolve a pricing suit regarding its Pepcid heartburn drug, which was initially filed in the Eastern District of Louisiana by a local doctor and then joined by the DOJ and the same 49 states. All told, these amounts total more than $650 million, the WSJ notes.

Merck also has agreed to enter into a corporate-integrity agreement with the U.S. Department of Health and Human Services.

For further details of the False Claims Act litigation that led to the settlement, see this DOJ press release.

In one of the largest civil settlements ever, the company also agreed last year to pay $4.85 billion to settle a product liability case over its Vioxx painkiller.

However, the settlement has been controversial, with uncertain payout amounts and, at least prior to recent amendments, what some perceived as questionable restrictions on attorney advice in settlement provisions.

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