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Merck to pay out US$650m to end pricing lawsuits

Pharmaceutical giant Merck & Co has agreed to pay more than US$650 million to resolve allegations of fraudulent drug pricing and improper kickbacks, the US Justice Department announced on Thursday.

The settlement hinged on two separate lawsuits relating to claims that Merck failed to pay proper rebates to government health care programs and that it made illegal payments to health care providers as inducements to use Merck products.

US Attorney General Michael Mukasey said the accord marked "one of the largest healthcare fraud settlements ever achieved by the Justice Department."

"It reflects our continuing effort to hold drug companies accountable for devising pricing schemes that deliberately seek to deny federal health care programs the same lower prices for drugs that are available to other commercial customers," Mukasey said.

The settlement was partly based on a whistleblower lawsuit brought by former Merck employee, H. Dean Steinke, who claimed that the pharmaceutical firm violated the Medicaid Rebate Statute in connection with its marketing of Zocor and Vioxx.

Zocor is a cholesterol lowering drug. Vioxx was used to treat acute pain and in the treatment of arthritis and was withdrawn from the market by Merck in September 2004.

Steinke's lawsuit alleged that Merck offered deep discounts for the two drugs if hospitals used large quantities of the drugs instead of rival treatments produced by Merck's competitors.

The Medicaid Statute requires drug manufacturers to report their "best prices" and other pricing information to the government in order to ensure that Medicaid, a government health care scheme, benefits from the same discounts and pricing enjoyed by other drug purchasers.

The government said, however, that Merck improperly did not fully reveal discounted prices it had offered to hospitals to boost its sales.

The New Jersey-based drugmaker confirmed separately that it had reached a settlement with the government and state authorities in the cases.

"The settlements do not constitute an admission by Merck of any liability or wrongdoing," Merck said in a statement.

A separate lawsuit filed by a New Orleans doctor, which also formed part of the overall settlement, alleged that Merck ran a marketing scheme which offered substantially reduced prices for its Pepcid products once hospitals agreed to use the drug.

The government will receive US$360 million under the accord while 49 states and the District of Columbia will receive more than US$290 million.

Steinke will receive more than US$64 million from the settlements under government whistleblower laws.

Merck's stock closed a scant US$0.01 lower at US$45.70 in the wake of the announcement.
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