PBM Medco Health Solutions agrees to settle Medicare fraud, kickback allegations for $155 million

Medco Health Solutions, the largest U.S. pharmacy benefit manager, on Monday agreed to pay $155 million to settle fraud allegations brought by the federal government and several former company employees, the Newark Star-Ledger reports (Silverman, Newark Star-Ledger, 10/24).

The allegations, which involve mail-order prescriptions provided to members of the Federal Employees Health Benefits Program, include most of a complaint filed by two former company employees under the False Claims Act (Kaiser Daily Health Policy Report, 5/8). The federal government in 2003 amended the complaint. According to the complaint, Medco canceled and destroyed prescriptions to avoid penalties, sought kickbacks from pharmaceutical companies to promote their medications and paid kickbacks to health insurers in exchange for their business (Wisenberg Brin, Dow Jones, 10/23). Medco also switched prescriptions without physician consent, did not fill prescriptions completely and failed to inform physicians about adverse medication interactions, according to the complaint (Bloomberg/Los Angeles Times, 10/24). In addition to that complaint, Medco agreed to settle an investigation that the Department of Justice began in 2004 into allegations of false Medicare claims and a false claims complaint filed in 2003 by a third former company employee. Medco admitted to no wrongdoing in the settlement. Medco officials in May announced that company would take a one-time pretax charge of $163 million in the first quarter to cover the settlement and related legal costs (Dow Jones, 10/24). The settlement primarily covers Medco conduct between 1998 and 2004 (Von Bergen, Philadelphia Inquirer, 10/24).

Reaction

Pat Meehan, U.S. attorney for the Eastern District of Pennsylvania, said that the settlement "and others like it represent a sweeping change in the way pharmacy benefit managers do business." Meehan added, "Hidden financial agreements between PBMs and drug manufacturers and health plans, along with the bottom-line pressures of management, can influence which drugs patients receive, the price we all pay for drugs and whether pharmacists serve patients with their undivided professional judgment" (Johnson, AP/Long Island Newsday, 10/23). Jim Sheehan, an assistant U.S. attorney who led the investigation of Medco, said, "We're delighted we were able to reach a resolution," adding, "This is a relatively new industry and we felt there were relatively significant fraud issues that needed to be addressed" (Newark Star-Ledger, 10/24). Sheehan added, "When you open your prescription bottle, you should know what's inside. What's inside should be what's on the label and in the same quantity. If it is a different drug, you should know it before you open the bottle." Medco in a statement said, "After nearly seven years of inquiry, these issues end as they began -- with no finding of wrongdoing by Medco or any of its people. Our business practices today are widely regarded as setting the standard for our industry" (Philadelphia Inquirer, 10/24). Medco spokesperson Soraya Balzac said, "Even though we did nothing wrong, for our company and our clients, it's the right decision to put these aged matters in the past" (Dow Jones, 10/23).