Top Rx benefits manager tied to $200M in kickbacks
Thursday, December 02, 2004
BY ED SILVERMAN
Star-Ledger Staff
Medco, the nation's largest pharmacy benefits manager, paid more than $200 million in kickbacks to a big managed-care company to win contracts, according to court documents filed by the U.S. Attorney's Office in Philadelphia.
The recipient company wasn't named in the documents, which were filed last week in connection with a federal civil lawsuit against Medco. However, this marks the second time Medco has been accused of making kickbacks to a large health insurer.
Last year, the Franklin Lakes company was charged in a civil case with paying $87.4 million to a health plan that later was identified as Oxford Health.
The federal lawsuit filed last year followed a lengthy investigation by U.S. Attorney Patrick Meehan into contracts held by Medco to manage prescription drug benefits for nearly 5 million federal workers and their dependents.
Medco spokesman Jeff Simek yesterday denied making any secret payments to obtain business. The $200 million was paid as part of a five-year contract to buy important data from the health plan, and a rival bidder offered the same deal, he said. Medco previously said payments to Oxford were legal and proper.
"This is an unproven, unvetted, speculative allegation pulled out of context and refers to a contract that is no longer in effect," Simek said. "We believe the allegations are absolutely unfounded."
The U.S. Attorney's Office declined to provide details. The reference comes in a filing that says a deposition of a witness was "necessary because he is the most knowledgeable individual about Medco's offer of a kickback in excess of $200 million to a large managed care organization for its business."
The allegations provide a glimpse into the highly complicated world where prescription medicines are bought and sold. The charges come at a time when the public, government agencies and law enforcement officials are focusing on the process because of the soaring costs of medicine.
Pharmacy benefits managers act as middlemen by purchasing huge quantities of medicine at a discount on behalf of clients such as government agencies, corporations and unions.
Often, a pharmacy benefits manager will provide these services as part of a contract with an insurer that offers one-stop shopping for its clients' insurance and pharmacy benefits needs. Being part of such an arrangement can mean huge profits for pharmacy benefits managers.
As drug prices rise, though, these middlemen have become the focus of increasing government scrutiny. Federal and state officials want to know whether pharmacy benefits managers are passing along their best prices to state agencies and consumers.
"Ultimately, consumers and taxpayers are footing the bill in the form of increased costs," said Patrick Burns of Taxpayers Against Fraud, an advocacy group based in Washington, D.C.
Express Scripts, a Medco rival, is being investigated by New York Attorney General Eliot Spitzer for allegedly keeping rebates that should have been passed on to clients and pressuring doctors to switch prescriptions to costlier drugs made by companies that offered the rebates.
Earlier this year, Medco paid nearly $30 million to settle civil charges made by 20 states that the company purchased higher-priced medicines for which it received bigger rebates from drug makers. Some drugs are made by Merck, which spun off Medco last year. New Jersey was not part of that settlement.
At the same time, the U.S. Attorney's Office in Philadelphia reached a partial settlement of its lawsuit against Medco, but continued to pursue charges of false claims and kickbacks. The U.S. attorney got involved last year by joining a whistleblower lawsuit against Medco.
In pursuing its case, the government says Medco violated the False Claims Act, which could prove costly. Last year, Assistant U.S. Attorney Jim Sheehan said Medco, if found guilty, could pay triple damages, plus $5,000 for each claim of a fraudulent act involving a prescription.
The government charges Medco defrauded the federal employee benefits program by canceling prescriptions, changing prescriptions without consent from doctors, shorting the number of pills in bottles, and lying about calling doctors to warn of bad-drug interactions.
Medco has repeatedly insisted that allegations of systemic abuse were untrue or reflected isolated incidents that occurred many years ago, but were since corrected. The company also has insisted that patient care has never been compromised.
However, a recent report in the Wall Street Journal indicated Medco had reopened an internal inquiry into the practices of its mail-order pharmacists.
Meanwhile, Medco and the U.S. Attorney's Office are skirmishing over documents. One government filing complained that Medco failed to meet deadlines and otherwise scrambled documents contained in computer files, which made them difficult to sort and read.
The Medco spokesman said many requests for documents were made late, and maintained that the company has been forthcoming and cooperative.
Thursday, December 02, 2004
BY ED SILVERMAN
Star-Ledger Staff
Medco, the nation's largest pharmacy benefits manager, paid more than $200 million in kickbacks to a big managed-care company to win contracts, according to court documents filed by the U.S. Attorney's Office in Philadelphia.
The recipient company wasn't named in the documents, which were filed last week in connection with a federal civil lawsuit against Medco. However, this marks the second time Medco has been accused of making kickbacks to a large health insurer.
Last year, the Franklin Lakes company was charged in a civil case with paying $87.4 million to a health plan that later was identified as Oxford Health.
The federal lawsuit filed last year followed a lengthy investigation by U.S. Attorney Patrick Meehan into contracts held by Medco to manage prescription drug benefits for nearly 5 million federal workers and their dependents.
Medco spokesman Jeff Simek yesterday denied making any secret payments to obtain business. The $200 million was paid as part of a five-year contract to buy important data from the health plan, and a rival bidder offered the same deal, he said. Medco previously said payments to Oxford were legal and proper.
"This is an unproven, unvetted, speculative allegation pulled out of context and refers to a contract that is no longer in effect," Simek said. "We believe the allegations are absolutely unfounded."
The U.S. Attorney's Office declined to provide details. The reference comes in a filing that says a deposition of a witness was "necessary because he is the most knowledgeable individual about Medco's offer of a kickback in excess of $200 million to a large managed care organization for its business."
The allegations provide a glimpse into the highly complicated world where prescription medicines are bought and sold. The charges come at a time when the public, government agencies and law enforcement officials are focusing on the process because of the soaring costs of medicine.
Pharmacy benefits managers act as middlemen by purchasing huge quantities of medicine at a discount on behalf of clients such as government agencies, corporations and unions.
Often, a pharmacy benefits manager will provide these services as part of a contract with an insurer that offers one-stop shopping for its clients' insurance and pharmacy benefits needs. Being part of such an arrangement can mean huge profits for pharmacy benefits managers.
As drug prices rise, though, these middlemen have become the focus of increasing government scrutiny. Federal and state officials want to know whether pharmacy benefits managers are passing along their best prices to state agencies and consumers.
"Ultimately, consumers and taxpayers are footing the bill in the form of increased costs," said Patrick Burns of Taxpayers Against Fraud, an advocacy group based in Washington, D.C.
Express Scripts, a Medco rival, is being investigated by New York Attorney General Eliot Spitzer for allegedly keeping rebates that should have been passed on to clients and pressuring doctors to switch prescriptions to costlier drugs made by companies that offered the rebates.
Earlier this year, Medco paid nearly $30 million to settle civil charges made by 20 states that the company purchased higher-priced medicines for which it received bigger rebates from drug makers. Some drugs are made by Merck, which spun off Medco last year. New Jersey was not part of that settlement.
At the same time, the U.S. Attorney's Office in Philadelphia reached a partial settlement of its lawsuit against Medco, but continued to pursue charges of false claims and kickbacks. The U.S. attorney got involved last year by joining a whistleblower lawsuit against Medco.
In pursuing its case, the government says Medco violated the False Claims Act, which could prove costly. Last year, Assistant U.S. Attorney Jim Sheehan said Medco, if found guilty, could pay triple damages, plus $5,000 for each claim of a fraudulent act involving a prescription.
The government charges Medco defrauded the federal employee benefits program by canceling prescriptions, changing prescriptions without consent from doctors, shorting the number of pills in bottles, and lying about calling doctors to warn of bad-drug interactions.
Medco has repeatedly insisted that allegations of systemic abuse were untrue or reflected isolated incidents that occurred many years ago, but were since corrected. The company also has insisted that patient care has never been compromised.
However, a recent report in the Wall Street Journal indicated Medco had reopened an internal inquiry into the practices of its mail-order pharmacists.
Meanwhile, Medco and the U.S. Attorney's Office are skirmishing over documents. One government filing complained that Medco failed to meet deadlines and otherwise scrambled documents contained in computer files, which made them difficult to sort and read.
The Medco spokesman said many requests for documents were made late, and maintained that the company has been forthcoming and cooperative.
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