Preliminary Approval Given In Medco Suit

August 5, 2003 ( - A federal judge in the Southern District Court of New York has given preliminary approval to a settlement in a class-action suit involving Merck & Co. subsidiary Medco Health Solutions, Inc., a prescription benefit manager (PBM).

 The settlement would resolve pending and potential litigation by pension plans against Medco Health and Merck based on ERISA provisions .   Under terms of the $42.5-million pact, Medco does not admit guilt in the deal, but it does agree to ensure clients fully understand their pharmacy healthcare services , according to a Dow Jones report.

>Among those disclosures Medco is pledging:

  • regular updates on changes to standard formularies
  • providing notice when generic equivalents become available
  • notification of new proposed therapeutic interchanges, involving interchanges of a lower-cost drug for a higher-cost option.

Agreed upon by five out of the six plaintiffs, the settlement would end all litigation surrounding claims to Medco’s position as a fiduciary under ERISA provisions; a position the plaintiffs all contend Medco acts in.  Medco does not believe it is a fiduciary under ERISA guidelines and terms of the settlement will not change that position. 

A December 11 hearing was scheduled for final approval of the settlement.

With the initial approval of the settlement now out of the way, Merck wasted no time moving forward on earlier announced spin-off plans, announcing Tuesday that it plans to spin-off Medco to shareholders on August 19.  Merck said it will issue 0.1206 shares of Medco for each share of Merck its stockholders own. Shareholders of record on August 12 will be eligible for the distribution, Merck said in a news release.