02/08/2008 - National Legal News

The U.S. Justice Department announced Thursday that pharmaceutical company Merck & Co. has agreed to pay over $650 million to settle claims that the drug maker paid illegal kickbacks to health care providers while defrauding federal health care programs.

The settlement comes in response to a whistleblower lawsuit filed by former Merck employee H. Dean Steinke. The lawsuit claimed that Merck violated the Medicaid Rebate Statute and engaged in illegal marketing strategies.

The Medicaid Rebate Statute requires pharmaceutical companies to report the lowest prices they offer on their products. Steinke’s suit alleged that Merck failed to report this information with regard to its cholesterol-lowering drug Zocor and its arthritis drug Vioxx.

Merck also allegedly offered heavy discounts on Zocor and Vioxx to health care providers, providing they use Merck’s brands instead of those manufactured by competitors.

A representative for Merck announced that the settlement does not imply admission of any wrongdoing. According to the representative, Merck believes it acted in good faith.

After the settlement was announced, Merck’s share reportedly dropped two cents.

The settlement, of which $360 million will go to the government and the other $290 million to the 49 states and the District of Columbia, follows a $4.85 billion settlement reached by Merck in November. That settlement was intended to resolve thousands of lawsuits claiming that Vioxx caused patients heart failure and stroke.