State Getting Merck Settlement

On Medicaid Rebates

Attorney General Richard Blumenthal, Chief State’s Attorney Kevin T. Kane, and Department of Social Services (DSS) Commissioner Michael P. Starkowski this week announced that Connecticut will receive almost $5 million in a nationwide settlement of allegations that Merck failed to pay the states Medicaid rebates on three of its drugs.

The $649 million settlement includes 49 states, the District of Columbia, and the federal government. Of the $4.99 million to Connecticut, the state will keep $2.22 million, with the rest to the federal government, which splits Medicaid’s costs with the states.

Federal and state authorities charged that Merck avoided paying states rebates required under the Federal Medicaid Drug Rebate statute for its drugs Zocor, Vioxx, and Pepcid. Merck allegedly did so by purposely failing to report its “best” or lowest price for the drugs. Generally speaking, the lower the “best” price, the higher the rebate to a state Medicaid program.

Mr Blumenthal said a pharmaceutical firm fudging numbers to evade rebates is unacceptable and unconscionable.

“Merck failed to calculate steep discounts into its best price reports, costing Connecticut millions of dollars in federally mandated rebates,” he said. “This agreement rights Merck’s wrong, returning nearly $5 million improperly withheld from the state. I will continue fighting to assure drug companies follow the letter of the law, paying the state every penny of required rebates.”

Mr Starkowski said in a time of rising prescription drug costs and limited public resources, it is imperative the state ensures that all drug manufacturers pay the proper rebate amounts.

“This $5 million settlement sends a clear message that we expect absolute compliance from these manufacturers,” he said. “DSS will continue to work closely with the Attorney General’s Office and Chief State’s Attorney’s Office on behalf of taxpayers who fund public health care through the Medicaid program.”

Mr Kane commended the Medicaid Fraud Control Unit in the Office of the Chief State’s Attorney, the Attorney General’s Office, and the Department of Social Services for their continuing cooperation to combat fraud and abuse in the Medicaid program to prevent the loss or waste of limited public resources.

Under the Federal Medicaid Drug Rebate law, drug companies must include in their “best price” calculations discounts tied to conditions such as volume purchase requirements or market share. Merck, however, sold the three drugs to hospitals at discounts of 92 percent subject to market share, volume purchase and bundling pricing agreements, but failed to report them in its “best” price reports, state and federal authorities alleged. As a result, between 1996 and 2006, the company underpaid its rebates to the states by hundreds of millions of dollars.

The settlement resolves pending cases against Merck in US District Courts in Nevada, Pennsylvania, and Louisiana.

Zocor lowers cholesterol, Vioxx is an anti-inflammatory medication pulled from the market in 2004, and Pepcid treats acid reflex disease and other stomach ailments.