In two civil settlements reached with federal and state authorities, Merck has agreed to pay more than $650 million in penalties, to settle a variety of lawsuits and probes related to the past sales and marketing practices.
The settlement is expected to resolve longstanding investigations related to disputes over the proper calculation of Medicaid rebates as well as certain past sales and marketing activities that ended in 2001.
The settlements do not constitute an admission by Merck of any liability or wrongdoing. Merck believes its pricing and sales and marketing policies and practices were consistent with all applicable regulations and contracts during the relevant time.
This civil resolution encompasses two matters involving the federal government, the District of Columbia and all 49 states that participate in the Medicaid prescription drug programme. In the first matter that was pending in the Eastern District of Louisiana, Merck has agreed to pay $250 million plus interest. In the second matter that was pending in the Eastern District of Pennsylvania, which includes a related Nevada action, Merck has agreed to pay $399 million plus interest. Merck announced in December that it would take a $670 million charge in the fourth quarter of 2007 in anticipation of these two settlements.
Merck also agreed to enter into a corporate integrity agreement with the Office of Inspector General of the US Department of Health and Human Services. This agreement incorporates the company's existing comprehensive compliance program, which was substantially enhanced in 2001, governing its pharmaceutical sales and marketing activities in the United States. Merck's compliance programme includes specific policies and procedures governing the company's interactions with healthcare professionals and is designed to help prevent, detect and resolve potential violations of company policy or law.
"At Merck, we are dedicated to the highest standards of ethics and integrity," said Bruce Kuhlik, executive vice president and general counsel, Merck. "We have taken and will continue to take a leadership position in restoring trust in this industry and in ensuring that our interactions with healthcare professionals support the care of patients and further the public health."
Nearly all of the states acknowledged in their agreements that Merck voluntarily began to put in place substantial compliance initiatives in 2001, prior to Merck being contacted by the government concerning an investigation.
As a result of the agreements, lawsuits against Merck will be dismissed by federal courts in Philadelphia, New Orleans and Nevada.
The Philadelphia and New Orleans settlements both relate to investigations of past pricing programs. The Philadelphia settlement, including the related Nevada action, pertains to programs in place from 1998 through 2006 in which Merck offered hospitals significantly discounted prices on certain medications, including Mevacor, Vioxx and Zocor.
The Philadelphia case also relates to certain sales and marketing programs with respect to Merck pharmaceutical products sold within the United States that ended in 2001.
The New Orleans settlement relates to price discounts offered to hospitals for Pepcid from 1996 through 2001.