U.S. Joining Suit Against Medco
June 24, 2003; Page E01
(From www.DukeEmployees.com - Duke Energy Employee Advocate)
The U.S. attorney in Philadelphia announced yesterday that he is
joining a complaint against Medco Health Solutions Inc. that alleges the
nation's second-largest pharmacy-benefit manager improperly canceled
prescriptions, switched medications without physician approval and sent
patients partially filled orders.
The U.S. attorney's office has been investigating whistleblower
allegations against the company since 1999 and intends to file its own
complaint in September, said Associate U.S. Attorney James G. Sheehan.
The government has decided to intervene in two lawsuits brought by
three whistleblowers. Those suits allege that Medco changed prescriptions
without a physician's approval to favor more expensive drugs produced by
Merck & Co. and induced physicians with false information to switch to
higher cost Merck drugs. Medco also destroyed mail order prescriptions
without filling them and in other cases mailed patients less than the
number of pills ordered but charged for the full amount, the lawsuits
Medco is a subsidiary of Merck.
"We know from industry studies that almost half of mail order
participants will run out of medicine within two days if they fail to
receive their new prescriptions," said Patrick L. Meehan, the U.S.
attorney for the eastern district of Pennsylvania.
Medco officials contend that the allegations are untrue or "reflect
years-old isolated issues that were identified and corrected," said Ann
Smith, director of public affairs at Medco. At no time was the quality of
patient care compromised, Smith said.
Most Americans know pharmacy benefit managers, or PBMs, from the
plastic cards they hand over at local pharmacies when filling a
prescription. Major employers and health plans hire these companies to
negotiate with drug companies to control drug costs for plan enrollees,
and to oversee the complex paperwork associated with filling
The Senate is considering plans to provide prescription drug coverage
to the elderly that may enhance the clout of pharmacy-benefit managers,
industry analysts say. The companies are expected to administer government
drug spending under some plans, according to congressional testimony
offered by the National Association of Chain Drug Stores, and to receive a
larger share of government reimbursements for prescription drugs.
More than 62 million Americans get prescriptions processed through
Medco, according to the company. Medco handles pharmacy benefits totaling
nearly $30 billion per year, including $1.2 billion from Blue Cross Blue
Shield as part of the Federal Employees Health Benefits Program.
George Bradford Hunt and Walter W. Gauger, who both worked as
pharmacists in Medco's Las Vegas processing facility, and Joseph
Piacentile, a physician, allege in their complaints that on busy days
Medco would cancel or destroy prescriptions to avoid penalties for delays
in filling orders. Customers would be told that the prescriptions had
never been received, Sheehan said.
The company is also accused of fabricating records and, when the
handwriting on prescriptions was unclear or difficult to read, simply
guessing at what they said, according to Sheehan. The government's suit
against Medco could ask for damages in the millions of dollars and new
Merck acquired Medco in 1993 at a time when other drugmakers were
purchasing pharmacy-benefit managers. By the end of the 1990s, all
pharmaceutical manufacturers but Merck had sold their units amid concerns
that the drug companies would use the benefit managers to push their own
drugs, rather than doing what was best for clients.
In 1998 Merck signed a settlement agreement with the Federal Trade
Commission stating that "Medco has given favorable treatment to Merck
drugs." Last December, Medco agreed to pay $42.5 million to settle a
class-action lawsuit alleging that the company improperly promoted higher
priced Merck drugs rather than seeking the best price from alternative
pharmaceutical companies. Merck announced it intended to spin off Medco
last year, but delayed the initial public offering of shares because of
the depressed stock market.
Yesterday's announcement marks the first significant legal action by a
federal agency against a pharmacy-benefit manager. Previously, attorneys
general of at least 25 states have opened inquiries into Medco to
determine whether it has violated state laws, and New York State Attorney
General Eliot L. Spitzer said last Friday that his office was
investigating another company, Express Scripts Inc., for allegedly
overbilling state health plans
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