New Mexico Gets Big Pharmaceutical Award

February 08, 2008 -- (ALBUQUERQUE) -- New Mexico Attorney General Gary King today announced thatNew Mexico will receive $716,071 as part of two separate global settlements totaling $649 million with Merck & Co., Inc. The settlements involve 49 states, the District of Columbia and the federal government.

Merck is the manufacturer of the drugs Zocor, Vioxx, and Pepcid. The agreements with Merck, resolve allegations that the company failed to pay rebates due state Medicaid Programs under the Federal Medicaid Drug Rebate statute. The settlements also resolve claims filed by whistleblowers in the United States District Court for the Eastern District of Pennsylvania United States ex rel. H. Dean Steinke v. Merck & Co., Inc., (U.S. Dist. Ct. No. 00-6158 [E.D. PA]), in the United States District Court of Nevada State of Nevada ex rel. H. Dean Steinke v. Merck & Co., Inc., (U.S. Dist. Ct. No. CV-N-05-322 [D. Nev.]), and in the Eastern District of Louisiana United States ex rel. William St. John LaCorte, M.D. v. Merck & Co., Inc., (U.S. Dist. Ct. No. 99-3807 [E.D. LA]).

Article continues below...

Pharmaceutical manufacturers that supply products to Medicaid Recipients are required by the Federal Medicaid Drug Rebate law to give the Medicaid Programs the benefit of the “best price” available for those products. The manufacturers are required to file “best price” information with the Centers for Medicare and Medicaid Services (CMS). This information is then used to calculate rebates to be paid by these manufacturers to the state Medicaid Programs. In general, the lower the best price, the higher the rebate obligation. The federal law requires the “best price” reported by the manufacturers to include discounts. However, prices that are considered “merely nominal” are exempted from the reporting requirement. The states have maintained that “merely nominal” means the discounted price is not tied to any conditions, such as volume purchase requirements or market shares.

The cases that were pending inPennsylvania and Nevada involve the SAVE and VIP programs, which were two Merck discount programs wherein Merck tried to use the nominal price exceptions. The SAVE program (Simvastatin Acute-care Value Enhancement program), was for the marketing of the drug Zocor, and the VIP program (Vioxx Incentive Program) was for the drug Vioxx. At the heart of each program was an agreement that Merck would sell the drugs to hospitals at a 92% discount from the catalog price, but only if the hospitals reached certain

market shares for the drugs. Because the 92% discounts were conditioned on the hospitals’ volume purchases to reach certain market shares, the states contend that the resulting discounted prices were not “merely nominal”. Therefore, the states contend that Merck was required to report these discounted prices to CMS, and that their failure to do so resulted in less rebates paid to the state Medicaid programs.

Source: New Mexico Attorney General