June 24, 2003

Merck division facing lawsuits

By Linda Loyd
Knight Ridder Newspapers


PHILADELPHIA — The U.S. attorney in Philadelphia joined Monday in two "whistleblower" lawsuits alleging that Merck & Co.’s prescription benefits manager unit canceled and destroyed patients’ mail-order prescriptions and often switched patients to Merck medicines, even if they were more expensive.

U.S. Attorney Patrick L. Meehan said the government will prosecute two cases brought by three whistleblowers against Medco Health Solutions Inc., the nation’s second-largest pharmacy benefit manager serving more than 62 million people.

The lawsuits, filed by physician Joseph Piacentile, of Ramsey, N.J., and two Las Vegas pharmacists, under the False Claims Act, also charge that Medco employees sometimes destroyed patients’ mail-order prescriptions on busy days to avoid penalties for delays, said prosecutors, who Monday unsealed the lawsuits, originally filed in 1999 and 2000.

"It’s pretty astounding," said Associate U.S. Attorney James G. Sheehan. "I can’t comment on the evidence, but we think there is merit to the allegations and we are jumping in."

Prosecutors are not currently pursuing charges against Merck, the second-largest U.S. pharmaceutical company behind Pfizer Inc. Merck, based in Whitehouse Station, N.J., declined comment, and referred calls to a Medco spokesman.

Medco Health spokesman Jeff Simek said, "The allegations in the whistleblower complaints are absolutely untrue, or reflect years-old isolated issues that were identified and corrected, and in no way, and in no time, compromised the quality of patient care."

Medco Health, based in Franklin Lakes, N.J., also is accused of favoring Merck drugs when cheaper alternatives were available and sometimes mailing prescriptions with fewer pills than were ordered and paid for — thereby shorting patients, according to the complaints, prosecutors said.

The U.S. Attorney’s office said it would file its own complaint in September.

The two whistleblower pharmacists formerly worked at Medco’s largest mail-order pharmacy in Las Vegas. Piacentile, a physician, never worked for Medco, but he talked to employees and obtained documents.

Piacentile’s attorney, Mitchell R. Kreindler, declined comment on where his client lives or works, saying the facts will be revealed at trial.

Kreindler said the main allegation was that Medco "improperly" defrauded government agencies by "switching patients from one drug to another drug without their consent or knowledge, at an increased expense" to government-funded health plans such as Medicare and Medicaid.

The lawsuits were made public Monday when prosecutors unsealed the complaints.

Medco Health, one of the nation’s largest managers of pharmacy benefits programs, had $33 billion in revenue last year and enrolled one out of every five Americans, managing more than 548 million prescriptions through its 11 mail-order pharmacies and working with 60,000 retail pharmacies nationwide.

Its clients include 190 of the Fortune 500 corporations, labor unions, health maintenance organizations, Blue Cross and Blue Shield plans and local, state and federal employee programs, according to Medco’s Web site.

Philadelphia attorney Marc. S. Raspanti said the "central issue" for his clients, the pharmacists who formerly worked in Medco’s largest mail-order center in Las Vegas, was the "assembly-line approach to dispensing mail-order drugs."

"A licensed pharmacist lives to make sure a patient is receiving the medication the doctor ordered," Raspanti said. "They became concerned that certain automated procedures that were put in place by the company curtailed the normal checks and balances. Work was being delegated to people" who were not pharmacists.

The suits charged that Medco routinely misled physicians to switch patients to Merck drugs, telling doctors they were helping the health plan "meet its control objectives." Doctors were led to believe Merck medications cost less when, in fact, they often were more expensive.

The complaints also accused Medco of shortchanging patients by mailing them fewer than the number of pills they paid for. The suits contend the company tried to avoid penalties for delays in filling mail orders by destroying prescriptions on days when the order volume was heavy.

The suits also said the company failed to call doctors to clarify prescriptions that were unclear, and fabricated records to make it appear as if calls from pharmacists to physicians had been made.

In January 2002, Merck announced plans to spin off its Medco business, then known as Merck-Medco, in an initial public offering of stock. But the company canceled the IPO in July after disclosing it recorded as revenue more than $12 billion for the past three years by counting prescription-drug co-payments to Medco.

In May, Merck announced that the Medco subsidiary would be spun off instead to Merck shareholders, and that the sale of shares should be completed in the third quarter.

Shares of Merck fell 78 cents, or 1.24 percent, to close at $62.11 in trading on the New York Stock Exchange.

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