General Gansler Announces Multimillion Dollar Settlement with
Merck & Co., Inc
Pharmaceutical Company Maker of Zocor, Vioxx and Pepcid
MD (February 9, 2008) - Attorney General Douglas F. Gansler today
announced that Maryland will receive a total of $4,602,042
for its Medicaid Program as part of two separate global settlements
totaling $649 million with Merck & Co., Inc. The settlements
involve 49 states, the District of Columbia and the federal government.
Medicaid is jointly funded by the State and federal government.
More than $2 million dollars of Maryland’s share of the settlement
will be returned directly to the Maryland Medicaid Program.
Merck is the manufacturer of the drugs Zocor, Vioxx, and Pepcid.
The agreements with Merck resolve allegations that the company
failed to pay rebates due state Medicaid Programs under the Federal
Medicaid Drug Rebate statute. The settlements also resolve claims
filed by whistleblowers in the United States District Court for
the Eastern District of Pennsylvania, in the United States District
Court of Nevada, and in the Eastern District of Louisiana.
manufacturers that supply products to Medicaid Recipients are
required by the Federal Medicaid Drug Rebate law
to give the Medicaid Programs the benefit of the “best price” available
for those products. The manufacturers are required to file “best
price” information with the Centers for Medicare and Medicaid
Services (CMS). This information is then used to calculate rebates
to be paid by these manufacturers to the state Medicaid Programs.
In general, the lower the “best price,” the higher
the rebate obligation. Federal law requires the “best price” reported
by the manufacturers to include discounts. However, prices that
are considered “merely nominal” are exempted from the
reporting requirement. The states have maintained that “merely
nominal” means the discounted price is not tied to any conditions,
such as volume purchase requirements or market shares.
The cases that were pending in Pennsylvania and Nevada involve
the SAVE and VIP programs, which were two Merck discount programs
wherein Merck tried to use the nominal price exceptions. The
SAVE program (Simvastatin Acute-care Value Enhancement program),
was for the marketing of the drug Zocor, and the VIP program
(Vioxx Incentive Program) was for the drug Vioxx. At the heart
of each program was an agreement that Merck would sell the drugs
to hospitals at a 92% discount from the catalog price, but only
if the hospitals reached certain market shares for the drugs.
Because the 92% discounts were conditioned on the hospitals’ volume
purchases to reach certain market shares, the states contend
that the resulting discounted prices were not “merely nominal.” Therefore,
the states contend that Merck was required to report these discounted
prices to CMS, and that their failure to do so resulted in less
rebates paid to the state Medicaid programs.
The case in
Louisiana involved Merck’s drug Pepcid, and
another discount program, Flex NP. Under this program, Merck sold
various formulations of Pepcid to hospitals in bundled pricing
arrangements. In exchange for the hospital meeting a certain market
share or other purchase requirements, Merck gave hospitals an array
of discounts of up to 92% on Pepcid tablets, and lesser discounts
on other types and formulations of Pepcid. According to the government,
the transactions under the Flex NP Program constituted “bundled
sales” which required Merck to adjust “best price” among
the different formulations to reflect these discounts. The states
contend that Merck failed to reflect these discounts in their “best
price” reports, resulting in less rebates paid to the state
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 Corporate
Integrity 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 did, however,
begin voluntary compliance initiatives associated with their sales
and marketing activities prior to learning of the government’s
investigation of the conduct associated with these settlements.
“This settlement is a significant recovery for our Medicaid
program,” said Attorney General Gansler. “This case
should send a message to other pharmaceutical companies that the
government will not tolerate rebate avoidance through creative
interpretation of rules that advance their drug marketing programs.”
Association of Medicaid Fraud Control Units, of which the Maryland
Medicaid Fraud Control Unit of the Maryland Attorney
General’s Office is a member, conducted the settlement negotiations
on behalf of the states.