April 26

VIOXX – Merck–MEDCO – a case study

VIOXX – Merck–MEDCO – a case study

Wed, 13 Oct 2004

Vioxx: A case study in how a lethal drug is marketed and dispensed – without MINIMAL safeguards to protect people’s lives.

Merck marketed and sold billions of dollars worth of Vioxx through MEDCO–the largest Medicare Pharmacy Benefit Manager (PBM) in the world – covering 62 million patients.

MEDCO happened to be a mail order subsidiary of Merck until fall of 2003, when Merck spun off Medco.

What makes this unique and what the federal investigators are paying close attention to, is the way that Merck leveraged Medco to bundle and promote Merck products such as Vioxx.

How did the thousands of heart attacks in patients taking Vioxx go unnoticed by either Merck or MEDCO?

Medco was accused of switching patients from physician prescribed drugs to Merck products. In business parlance, this form of fraud is often called "vertical integration."

The two companies parted just as two dozen state and federal regulators were closing in on Medco for drug switching, bundling, and consumer fraud and anti-trust violations. On April 26, 2004, nineteen state attorneys general settled with Medco for $29 million. However, just as Eliot Spitzer settled the criminal fraud case against GlaxoSmithKline – without regard for victims of the alleged fraud, neither did the MEDCO settlement provide any relief to the patients and families who were victimized – some of who died from the drug. http://www.oag.state.ny.us/press/2004/apr/apr26b_04.html

How did the thousands of heart attacks in patients taking Vioxx go unnoticed by either Merck or MEDCO?

Merck, like all drug manufacturers, is supposed to have an adverse reporting system in place – but the FDA never enforced the requirement. One would think that both Merck and Medco had direct adverse reporting systems in place.

In fact, the Vioxx recall is due to a study, not due to pharmacy and PBM adverse event reports.

We’ve been advised by experienced consumers that every Medco customer would instantly know why no one tracks adverse drug effects.

Medco customers – patients and physicians–cannot reach a Medco pharmacist.

If a Medco patient seeks counseling, or has questions or concerns or would like to report an adverse event, that patient would:

(1) be shuffled from voicemailbox to voicemailbox by Medo’s phone system or

(2) have to leave a voice mail message on a Medco voice mailbox.

The FDA will be the first one to admit that the agency does NOT regulate either pharmacies or Pharmacy Benefit Managers such as MEDCO.

It is left to state pharmacy boards which are undermanned and outgunned by PBM executives and attorneys.

This means that there is no national drug monitoring agency and no national platform for pharmacy and PBM to report adverse drug reactions.

Many of the larger pharmacies claim to have internal reporting mechanisms in place, but there is no regulation mandating that these adverse events must be reported to the FDA–and there is no universal reporting standard.

It is striking that drug companies such as Merck spend hundreds of millions of dollars marketing and tracking drug sales – but fail to track lethal drug effects:

For example, a drug company representative can, in most cases, tell you how much of their drug was dispensed w/in the last 24 hours.

He can tell you which pharmacy or PBM dispensed it; and which physicians are prescribing their drug – and how many times.

Why is it that a company such as Merck–whose marketing and sales tracking methods that monitor both physicians and pharmacies, garnered them $2.5 billion in Vioxx sales–was not required to have a universal adverse event reporting system in place?

The UK has improved their "Yellow card" adverse drug reporting system, why has the FDA failed to initiate new safety measures or even to enforce existing reporting requirements?

Why is there no mandatory adverse drug effect reporting requirement in place – even for lethal drug effects?

The technology is in place – drug sales data is meticulously tracked.

If such a reporting system were in place, hundreds of thousands of lives would be saved.

Contact: Vera Hassner Sharav

State Attorney General, Eliot Spitzer

Department of Law
120 Broadway
New York, NY 10271

Department of Law
The State Capitol
Albany, NY 12224

For More Information:
(212) 416-8060

For Immediate Release
April 26, 2004


Medco to provide price information to doctors and patients and more than $29 million to states

State Attorney General Eliot Spitzer today joined Attorneys General from 19 other states in announcing the settlement of claims under state deceptive trade practices laws against Medco Health Solutions, Inc. (Medco), for drug switching practices.

Medco is the world’s largest pharmaceutical benefits management (PBM) company, with over 62 million people covered. PBMs contract with health plans to process prescription drug payments to pharmacies for drugs provided to patients enrolled in the health plan.

According to a complaint filed in New York State Supreme Court and other state courts, Medco encouraged physicians and other prescribers to switch patients to different prescription drugs without disclosing that the switches benefitted Medco by increasing rebate payments from drug manufacturers. Medco represented to prescribers that a switch would result in savings to patients and health plans when in fact at times the drug switches increased costs, primarily in follow-up doctor visits and tests. For example, Medco switched patients from certain cholesterol lowering medications, like Lipitor, to Zocor, which required patients to pay for follow-up costs.

Attorney General Eliot Spitzer stated: “This case shows how pharmaceutical benefit managers previously hid from consumers, doctors and health plans that they were switching prescriptions to promote their own profits. With this settlement, patients and doctors will have full information and can make a decision based on the consumer’s best interest.

The settlement announced today prohibits Medco from soliciting drug switches when:

  • The net drug cost of the proposed drug exceeds the cost of the prescribed drug;
  • The prescribed drug has a generic equivalent and the proposed drug does not;
  • The switch is made to avoid competition from generic drugs; or
  • It is made more often than once in two years within a therapeutic class of drugs for any patient.

In addition, the settlement requires Medco to:

  • Disclose to prescribers and patients the minimum or actual cost savings for health plans and the difference in co-payments made by patients;
  • Disclose to prescribers and patients Medco’s financial incentives for certain drug switches;
  • Disclose to prescribers material differences in side effects between prescribed drugs and proposed drugs;
  • Reimburse patients for out-of-pocket costs for drug switch-related health care costs and notify patients and prescribers that such reimbursement is available;
  • Obtain express, verifiable authorization from the prescriber for all drug switches;
  • Inform patients that they may decline the drug switch and receive the initially prescribed drug;
  • Monitor the effects of drug switches on the health of patients; and
  • Adopt a specified code of ethics and professional standards.

Medco will pay more than $29 million to settle the deceptive trade allegations. $20.2 million will go to states in restitution; $2.5 million to the identifiable patients who incurred expenses related to a switch between cholesterol controlling drugs; and $6.6 million to states in fees and costs. States may use the funds to benefit low-income, disabled, or elderly consumers of prescription medications, to promote lower drug costs for residents of the state, or to fund other programs reasonably targeted to benefit a substantial number of persons affected by the conduct covered in the complaint.

New York State’s share of the $20.2 million is $2.23 million. New York will use its portion to fund prescription drugs at community health clinics and to explore the viability of a website and other communications to publicize differences in drug pricing at New York State pharmacies and the rights of insured consumers. New York State’s share of the $6.6 million in costs of investigation is approximately $410,000.

The multi-state investigation began two years ago in Arizona, California, Connecticut, Delaware, Florida, Illinois, Iowa, Louisiana, Maine, Maryland, Massachusetts, Nevada, New York, North Carolina, Oregon, Pennsylvania, Texas, Vermont, Virginia and Washington.


Order and Judgement

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