Government Plans to Join Case Against Merck Unit

Updated from June 23

The federal government said Monday that it plans to join a lawsuit brought against Medco, the pharmacy-benefits unit of Merck ( MRK).

The current suit, filed by a former company employee, alleges that the company exercised poor oversight in filling prescriptions, and increased pharmaceutical costs for the government, in a bid to boost profits. The government's involvement in the suit doesn't necessarily mean that it believes all the allegations, The Wall Street Journal reported. The government now has 90 days to file its own complaint with the court, the Journal said.

"The kind of conduct alleged in the complaints threatens not only the integrity of the system as a whole, but also the well-being of the very patients it is designed to benefit," said U.S. Attorney Patrick Meehan in a statement. "Getting the proper medication in the hands of patients as quickly and efficiently as possible should be the mission of any pharmacy benefit manager. However, these allegations suggest that, somewhere along the line, the focus became the profit instead of the patient."

Merck announced in April that it plans to spin off Medco as a public company in a move that will allow Merck to focus on its drug pipeline, according to a Dow Jones Newswires report.

A Medco spokesman said, "We are confident that when all the facts are presented they will show that our business has one focus, providing the highest quality of prescription health care to our clients and members. We are prepared to present a vigorous defense and believe that we will prevail. We will prove that the allegations in the complaint are absolutely untrue or reflect past issues that were identified and corrected and in no way and at no time compromise the quality of patient care."

When questioned about the past issues, the Medco spokesman said, "One client was affected in an isolated case. As a result, two senior-level people were dismissed, three people were severely reprimanded, and the client was fully informed of the situation." He didn't provide further details.

The government's announcement follows an investigation of the allegations made against Medco. The company has been accused of canceling, deleting and destroying patients' mail-order prescriptions on days of heavy prescription volume, so that it could avoid penalties for its delays in filling and mailing prescriptions. Medco also allegedly induced physicians to authorize switching of prescriptions from lower- to higher-cost medications, while saying that the switch was for the purpose of reducing prescription costs for the health program. The suit contains other allegations as well.

Merck's shares were down 0.1%, or 34 cents, at $62.11 early Tuesday.

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