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W. Va. Sues Merck-Medco Over Rebates

Nov 14, 2002 | AP

West Virginia authorities have sued the pharmacy benefits subsidiary of drug giant Merck, accusing it of pocketing more than $6 million that should have gone to the state under a plan for cutting prescription costs.

Merck-Medco cost the state millions more by steering people covered by the Public Employees Insurance Agency to expensive, Merck-made drugs, the filing Wednesday in Kanawha Circuit Court said.

"They caused a serious financial strain on PEIA," agency Director Tom Susman said. "I had to go to our members about raising premiums at a time when people were profiteering off of those premiums."

Susman and Attorney General Darrell McGraw announced the lawsuit at a Wednesday news conference. McGraw said the suit alleges fraud, breach of contract and unjust enrichment.

Merck-Medco, now known as Medco Health Solutions Inc., sued the agency late last month, contending it is owed $700,000 from its tenure as PEIA's pharmacy benefits manager.

"We believe that for two years we provided quality services that provided a net program savings," said Jeff Simek, Medco Health's vice president for public affairs. "We're confident that we fully performed the terms of our agreement. We believe a court will agree."

McGraw and Susman called the company's lawsuit a pre-emptive strike meant to intimidate the state.

Susman fired Merck-Medco on June 30 and replaced it with Express Scripts of St. Louis. PEIA was then told that Merck-Medco had kept rebates totaling $6 million that drug makers had offered the state over the years.

"They said, 'we've given you everything you're entitled to,'" Susman said. "They now tell us they saved us money, and that we owe them money for this savings. In fact, they cost significant dollars to the members and to the agency."

Though Merck-Medco had been hired to reduce prescription costs, those costs rose from $65 million to $108 million within three years, Susman said.

"PEIA's drug expenditures rose to a level substantially higher than can be accounted for by drug inflation rates and member utilization," the lawsuit alleges.

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