Merck settles with feds and states for $649M

Merck & Co. Inc. agreed to pay more than $649 million in penalties Thursday, in two civil settlements reached with federal and state authorities, to resolve long-standing investigations related to disputes over Medicaid rebates and past sales and marketing activities.

The pharmaceutical giant (NYSE:MRK) agreed to pay $250 million plus interest to resolve litigation in the Eastern District of Louisiana, and $399 million plus interest to resolve litigation in the Eastern District of Pennsylvania -- which included a related Nevada action.

The settlements included no admission by Merck of any liability or wrongdoing. Merck officials said the company believes its pricing and sales and marketing policies and practices "were consistent with all applicable regulations and contracts during the relevant time."

Merck, which is based in Whitehouse Station, N.J., and has major operations in Montgomery County, Pa., took a $670 million charge in the fourth quarter of 2007 in anticipation of the two settlements.

As a result of the agreements, lawsuits against Merck will be dismissed by federal courts in Philadelphia, New Orleans and Nevada.

The Philadelphia and New Orleans settlements both relate to allegations that Merck underpaid rebates to state and federal Medicaid programs by not offering the same significantly discounted prices it offered to hospitals for certain drugs from 1998 through 2006. Those drugs included Mevacor and Zocor, for high cholesterol, and Vioxx, a pain medicine that has since been withdrawn from the market.

The Philadelphia case also relates to certain sales and marketing programs that allegedly involved inducements paid to doctors and other health-care providers with respect to Merck pharmaceutical products sold within the United States. Those programs ended in 2001.

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