Medco Settles With Feds

The company takes a $163 million pretax charge.
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Updated from 7:06 a.m.

Medco

(MHS)

recorded a $163 million charge in its first quarter to cover a proposed settlement of federal charges that it defrauded customers by shorting, changing and canceling their prescriptions.

The Franklin Lakes, N.J., pharmacy benefit manager said the agreement with the U.S. Attorney's Office for the Eastern District of Pennsylvania covers two so-called whistleblower lawsuits filed in 1999, which led to a government complaint in a case that was due to go to trial next month. The pact also covers a separate lawsuit that remains sealed but was disclosed by Medco two years ago, and Medco's dealings with a federal recovery program that it stopped participating in last year.

Medco didn't admit wrongdoing but said it would have to set up a corporate integrity program as part of the settlement.

"We have consistently said that we would settle only if it made good business sense," said general counsel David Machlowitz. "Averting further disruption, uncertainty and distraction for our company and our clients is the right decision, assuming we can reach accord on the nonfinancial terms and put these three matters, many of which are based on years-old issues, in the past. Simply put, it is time to move on."

The government has already forced Medco to adopt different business practices. In December, Medco signaled a

new willingness to settle in a push to avoid a costly trial.