Vioxx Pain Could Spread to Medco

Daring Duo

Critics have raised concerns about both companies since they originally joined forces more than a decade ago. In a groundbreaking deal for the industry, Merck agreed in 1993 to pay $6 billion for Medco so that Merck could distribute -- as well as manufacture -- prescription medications. Drug analysts applauded the deal. But some PBM insiders immediately warned of conflicts.

"You could have a situation where Medco becomes a warehouse full of Merck products," Henry Blissenbach, president of competing Diversified Pharmaceutical Services, told the Wall Street Journal upon news of the deal.

Blissenbach went on to question whether Medco would evolve into "just a distribution arm" of Merck. Whistleblower lawsuits, focused in part on Medco's relationship with Merck, eventually followed. Under fire, the two companies finally parted ways last year.

But their separation agreement came with strings attached.

"Under the terms of the IPO," Business Week reported in mid-2002, "if Medco doesn't sell enough Merck products through the benefits plans it manages, it will have to pay the drug maker damages."

By then, it seems, Medco was more accustomed to collecting money from Merck and other drug manufactures instead. During the late 1990s, the PBM scored more than $3 billion in manufacturer rebates for promoting certain drugs, according to court documents cited by The New York Times before last year's spinoff.

The company "promoted Merck's own drugs especially vigorously," the Times documents stated. It favored, among others, "the Vioxx analgesic of Merck ahead of Celebrex from Pharmacia," the documents added.

Celebrex, a Pfizer (PFE Quote) drug that chemically resembles Vioxx, hasn't been linked to serious cardiac risks.

Scary Tune

In June 2003, two months before the Medco IPO, federal prosecutors officially stepped in and joined the whistleblower lawsuits against the company. They accused Medco of improperly switching patients to Merck drugs in one of their original nine charges against the company. They have since specifically mentioned Vioxx as a favored Merck drug in a fuller amended complaint.

They also described how Medco allegedly carried out its strategy.

"To increase drug-switching success rates, Medco Health pressures employees and pharmacists working in the managed care department to obtain switches of drugs, and requires employees and pharmacists to meet a quota of calls to physicians and others each hour," the complaint states. "If employees fail to meet the quota, they are subject to disciplinary action and employment review."

In addition, the lawsuit says, Medco routinely ignores complaints from patients and their physicians, "including the health risks associated with inappropriate drug switches." It also claims that Medco pocketed $440 million -- in 2001 alone -- for favoring Merck drugs.

By then, some believe, Merck could -- or at least should -- have known about Vioxx's dangers.

"The unacceptable cardiovascular risks of Vioxx were evident as early as 2000," Richard Horton, editor of the British journal The Lancet, wrote on Thursday. Merck defended itself, saying it had acted responsibly.

Meanwhile, Medco has portrayed itself as essentially immune to its former parent's headaches. The company promptly issued a press release predicting "no financial impact due to Vioxx" on the very day that Merck yanked the drug. The company said it would simply use therapeutic alternatives to replace lost Vioxx sales.