Medco Settles Kickback Claim for $155M

October 25, 2006 ( - Pharmacy benefits manager Medco Health Solutions has agreed to pay $155 million plus interest to settle charges it submitted false claims and paid and received kickbacks related to business endorsements.

A press release from the US Department of Justice said the government’s complaint alleged Medco violated the Anti-Kickback Act by soliciting and accepting payments from pharmaceutical companies to favor their products on Medco’s published list of drugs, and by paying kickbacks to induce health plans to award contracts to provide the mail order pharmacy benefits for plan beneficiaries.

The government also said Medco submitted false claims for mail order prescription drug services it was required by contract to provide to federal employees, retirees and their families under the Federal Employee Health Benefits Program, according to the release.

In addition, the company was accused of:

  • canceling valid prescriptions it could not timely fill to avoid paying penalties under its contract
  • shorting pills from prescriptions it filled
  • failing to conduct concurrent drug utilization review for all prescriptions to identify potential adverse drug interactions; and
  • when filling prescriptions, using drugs other than those prescribed by the physician to earn undisclosed rebates from drug manufacturers.

The settlement also resolves the government’s claims against former Medco Vice-President Diane Collins, who managed the Medco mail order pharmacy in Tampa, Florida. Collins was accused of canceling, and instructing others to cancel, valid patient prescriptions to cover up Medco’s failure to fill patient prescriptions in the time required by its contract. As part of the settlement, the members in the case will receive $23 million as their share of the government’s recovery, plus payment by Medco for their attorneys’ fees and costs.

Medco also agreed to settle a second action filed in 2003 by Karl Schumann, another former Medco employee, alleging kickbacks by pharmaceutical manufacturers to Medco. Schumann will receive $860,000 as his share of the government’s recovery, plus payment by Medco for his attorneys’ fees and costs.

The Justice Department said the United States and Medco also have settled a separate investigation by the United States Attorney’s Office in Philadelphia, initiated in 2004, into false claims to the Medicare program (See    Justice Department Slaps Medco With Civil Suit ). .

The settlement terms also include a condition of continued participation in government health programs requiring Medco enter into a corporate compliance agreement with the Office of Inspector General, Department of Health and Human Services; and with the Office of Inspector General of the Office of Personnel Management.