Merck reaches settlement in Medicaid rebate probe

By Jon Hurdle

PHILADELPHIA (Reuters) - Merck & Co (MRK.N) agreed to pay more than $649 million to resolve litigation related to its cholesterol drug Zocor and painkiller Vioxx, a federal prosecutor said on Thursday.

The settlement also resolves allegations that Merck paid inducements to doctors and other health care professionals through 2001, Patrick Meehan, U.S. attorney for Eastern Pennsylvania, said at a press conference.

Merck said in a statement that the settlements do not constitute an admission of any liability or wrongdoing.

"Merck believes its pricing and sales and marketing policies and practices were consistent with all applicable regulations and contracts during the relevant time," the company said.

Viveca Parker, an assistant U.S. attorney for Eastern Pennsylvania, said that between 1998 and 2006 Merck agreed with "hundreds" of hospitals nationwide to provide them with Zocor and Vioxx for about 10 percent of the market price, in return for their agreeing to buy higher volumes.

"That price was not being offered to the government," Parker said.

Also, between 1997 and 2001, Merck promoted its drugs by providing doctors all-expense paid trips and free dinners. The company also paid doctors to allow sales representatives to accompany them on their rounds, she said.

In a settlement related to a matter that was pending in the Eastern District of Louisiana, Merck has agreed to pay $250 million plus interest, the company said.

In a second matter that was before the Eastern District of Pennsylvania, which included a related Nevada action, Merck has agreed to pay $399 million plus interest.

Merck said in December that it would take a $670 million charge in the fourth quarter of 2007 in anticipation of these two settlements.

Merck said it agreed to enter into a corporate integrity agreement with the Office of Inspector General of the U.S. Department of Health and Human Services.

The agreement with federal and state authorities resolves longstanding investigations related to disputes over the proper calculation of Medicaid rebates as well as marketing activities.

Merck's shares were down 14 cents to $45.57 in afternoon trade on the New York Stock Exchange.

(Reporting by Jon Hurdle, editing by Leslie Gevirtz)