Share prices across the pharmaceutical industry fell Wednesday after Schering-Plough and Merck disclosed developments in federal investigations into their sales and marketing practices.
Schering said it has received two grand jury subpoenas, which ”seek a broad range of information concerning the company’s sales, marketing and clinical trial practices” related to hepatitis C drugs Intron A and Rebetron and cancer drug Temodar.
Merck said in an SEC filing that it has received requests for information from the Department of Justice about its sales and marketing practices. A similar disclosure was made in March.
The news made investors nervous because the drug industry is under growing scrutiny by state and federal investigators, as well as private litigators. The industry fears that the end result of the scrutiny could not only include fines, but also regulations and limits on pricing, marketing or patent efforts.
Just about every major drugmaker and several generic-drug firms faces probes or lawsuits on a variety of fronts. States are suing over efforts they say were used to block generic competition, while the federal government is looking into gifts to doctors and bonuses to pharmacists that may violate anti-kickback rules, as well as efforts that may have caused Medicare to overpay for drugs.
Schering, for example, has previously disclosed that the U.S. Attorney’s office in Massachusetts is looking into whether it manipulated the average wholesale price of some of its products. Average wholesale prices are used by states and the federal Medicare program as a basis for reimbursement.
By selling drugs to doctors for less than their stated wholesale prices thus allowing doctors to pocket the difference some drug companies have gained market share. Such moves also result in overpayments by Medicare and Medicaid programs, investigators say.
A Merck spokeswoman would not disclose details of the investigation the drugmaker faces, but said the request for information about its sales and marketing practices came from federal investigators in Pennsylvania.
That arm of the U.S. Attorney’s office has been investigating whether drug industry marketing practices, such as offering doctors free trips or large consulting fees, violate federal anti-kickback laws.