Whistle-Blowers File Medco Suit

November 17, 2003 (PLANSPONSOR.com) - In another black eye for pharmacy benefit manager (PBM) Medco Health Solutions, two former pharmacists allege the company cheated six states out of millions of dollars and put patients' health at risk.

The whistle-blowers allege that Medco defrauded six states, the District of Columbia, and the federal government of millions of dollars eachthrough a falsification of prescription dates to meet contract performance standards in state, federal and private health plans and to avoid penalties for delays in filling orders. The allegations were made in a lawsuit filed by the pair under federal and state False Claims Acts, which entitles whistle-blowers to a share of any money the government recovers, according to a news release.

This is the latest such lawsuit to come against the formerMerck & Co. subsidiary. In September, the US Justice Department joined a lawsuit group filing a civil complaint seeking unspecified monetary damages and a permanent injunction against the PBM (See Justice Department Slaps Medco With Civil Suit ).

In its defense, Medco denied any systematic wrongdoing and said the allegations lacked merit and credibility. “These allegations are largely based on the accounts of a convicted felon who never worked for Medco Health, and two pharmacists who left five years ago,” said Medco general counsel David Machlowitz.

“We weren’t surprised by the complaint. We are prepared to deal with it,” said the company’s president, chairman and chief executive officer, David Snow.

Mass. Weigh-In

One of the states allegedly defrauded, according to the two whistle-blowers is Massachusetts, which is examining the possibility of joining the whistle-blowers’ suit, since any wrong doing by Medco could have potentially affectedthe nearly 200,000 state employee and dependents for whom the PBM provided prescription drug benefits. The state has until February to decide whether to join the whistle-blowers’ suit and in making that determination, Massachusetts Attorney General Thomas Reilly is probing Medco’s performance from 1994 to 2000, when it managed drug benefits for many state employees and retirees through the Group Insurance Commission .

Any potential action by Massachusetts would only add to the legal trouble Medco has faced recently. In August, a federal judge in the Southern District Court of New York gave preliminary approval to a settlement in a class-action suit involving Medco. 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 health care service (See Preliminary Approval Given In Medco Suit ).

Additionally, last November the West Virginia Attorney General sued Medco for allegedly keeping rebates handed out by the drug companies that were intended for the state. The suit alleges that West Virginia’s 200,000 state employees were directed to higher priced drugs because of millions of dollars in rebates from drug makers being received by the PBM (See West Virginia Sues Medco Over Drug Costs ).