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Merck Pays More Than $400 Million to Settle Federal, State Medicaid Fraud Investigation Sparked by Qui Tam Whistleblower Case Detailing Marketing Schemes for Vioxx(R), Zocor(R), Several Other Drugs

Friday, February 8, 2008 General News J E 4
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PHILADELPHIA, Feb. 7 One of the world's largest drugmanufacturers, Merck & Co., Inc. ("Merck"), has agreed to pay more than $400million to the U.S., 49 states and the District of Columbia to settle qui tamwhistleblower-led allegations that the pharmaceutical giant illegallydefrauded Medicaid and other public healthcare programs across the U.S.,according to a federal Settlement Agreement unsealed today. Merck employedfour schemes to grab or maintain market share for drugs including Vioxx(R),Zocor(R), Cozaar(R), Fosamax(R), Maxalt(R), and Singulair(R), according to quitam whistleblower lawyers Steven H. Cohen, Mark Kleiman and BethAnne Yeager,who represent the whistleblower, a former Merck district sales manager.

Capping a marathon, seven-plus-year investigation among federal and stateauthorities and the qui tam whistleblower's legal team, the Merck casepresents several major legal milestones, according to Cohen, Kleiman andYeager, including:

Although Merck did not admit to wrongdoing, in addition to returning$400 million to taxpayers, the Whitehouse Station, New Jersey-based drugmanufacturer has agreed to be bound by a Corporate Integrity Agreement,according to Cohen, who, along with Yeager is associated with theWhistleblower Action Network in Chicago.

"Our relator, a former Merck sales manager, blew the whistle on Merckwhich resulted in a nationwide investigation by federal and state prosecutorsthat returned hundreds of millions of taxpayer dollars to the Medicaidprogram," Cohen said.

"When we realized the extent of the fraud, we took the evidence straightto the Government. Taking on Merck required close coordination and cooperationbetween us and the state and federal prosecutors. This taskforce approach andunrelenting commitment won a huge victory for the taxpayers." Kleiman said.

"This landmark case exposed abuses of Medicaid's Best Price nominal priceexception, and strengthened the Medicaid Rebate program to reduce the states'drug costs," Yeager said.

Aside from the huge settlement, the second largest FCA civil fraudMedicaid recovery, the case marked new ground with a collaborativeinvestigation model that saw the relator and his lawyers work closely withstate and federal Government investigators to press the case. This newinvestigative model, Cohen said, "will become the basis for future qui tamwhistleblower investigations, especially in an age of shrinking governmentbudgets."

The FCA, initially sponsored by President Abraham Lincoln to stop militaryfraud during the Civil War, allows private citizens with knowledge of fraud tohelp the Government recover ill-gotten gains and additional civil penalties.The FCA allows the Government to collect up to three times the amount it wasdefrauded, in addition to civil penalties of $5,500 to $11,000 per falseclaim. Whistleblowers whose cases settle or are won in court usually receiverewards representing 15 to 25 percent of qui tam recoveries.

The federal investigation was conducted by the U.S. Attorney's Office forthe Eastern District of Pennsylvania, under the direction of Patrick L.Meehan, U.S. Attorney, Assistant U.S. Attorney Virginia Gibson, Chief of theCivil Division, and Assistant U.S. Attorney Viveca Parker. Parker led thebroad investigation, including the review of more than 400 boxes of Merckdocuments, and fostered the coordinated work of her office, the states, thewhistleblower and his attorneys.

At the state level, Nevada Chief Deputy Attorney General Tim Terry, headof the state's Medicaid Fraud Control Unit, worked with the whistleblowerlegal team on the groundbreaking companion case brought by the State of Nevadaand the whistleblower. The Nevada case is part of the of the $400 millionglobal settlement announced today.

Terry and Patrick Keenan, Deputy Attorney General for Illinois, along withrepresentatives from Attorneys' Gener
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