Merck to Pay $670 Million to Settle Nominal Pricing Fraud False Claims Act Cases
21 Corporate Crime Reporter 48, December 4, 2007

Merck will pay $670 million to settle federal and state charges that it violated the False Claims Act by engaging in nominal pricing fraud.

Merck announced today that it was setting aside the $670 million “in connection with the anticipated resolution of investigations, the first of which was disclosed beginning in 2002, of civil claims by federal and state authorities relating to certain past marketing and selling activities, including nominal pricing programs and samples.”

One of the first nominal pricing fraud cases was filed against Merck under seal in Nevada.

But now many states and the federal government are involved.

The settlement will be the first in a series of federal cases brought against major pharmaceutical companies who engaged in nominal pricing fraud.

The major drug companies have allegedly been approaching hospitals with an irresistible offer – the drug company would provide the hospital with its statin drug, for example, at a nominal cost – say at a 95 percent discount.

In exchange, the hospital would agree to fill 95 percent of its statin prescriptions with that company’s statin drug.

How does the drug company make any money by giving hospitals a 95 percent discount?

“The same way a heroin dealer makes money,” says Patrick Burns of the Taxpayers Against Fraud. “You are not going to be in the hospital for long. But you will be on a statin for the rest of your life. Once they get you on the on ramp, it’s very hard to get you off.”

Burns says that while Merck will be the first case out of the chute, it won’t be the last. He anticipates billions of dollars in recoveries from the drug companies for this category of health care fraud.

“This first nominal pricing fraud case involves Merck’s drug Zocor,” Burns said. “But then you will probably have cases involving all of the statins. Then you will have all the proton pump inhibitors like Nexium. And then the pain medications like Merck’s Vioxx.”

Burns thinks that nominal pricing fraud will rank up there in the top three of major False Claims Act health care fraud cases along with the average wholesale pricing cases and the off label marketing cases.


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