Unsealed Court Documents Show PBM Medco Inflated Sales of Merck Products

Pharmacy benefit manager Medco Health Solutions, a subsidiary of pharmaceutical company Merck, helped increase sales of Merck products, according to documents unsealed Jan. 7 by Federal District Judge Charles Brieant, the New York Times reports. The documents are related to several class-action lawsuits filed against Merck and Medco for alleged failure to disclose their relationship. Merck in December agreed to pay $42.5 million to settle the lawsuits, but plaintiffs' attorneys asked Brieant to reject the settlement. Under the proposed settlement, Merck did not admit liability, the Times reports (Freudenheim, New York Times, 1/8). According to the lawsuits, Medco improperly promoted more expensive Merck treatments to clients, which include more than 1,500 health plans and large employers nationwide. PBMs direct doctors toward less expensive brand-name medications and generic treatments through prescription drug formularies to reduce costs for health plans, public health programs and employers. Brand-name pharmaceutical companies provide PBMs with discounts and rebates to have their treatments placed on the formularies, and PBMs share those discounts with their clients. However, in the past few years, competition between PBMs has reduced the rates that they can charge clients to process claims, and some have begun to help brand-name drug companies market more expensive treatments to increase revenue (American Health Line, 12/10/02).

Inflated Market Share
The unsealed court documents "disclose for the first time what Merck has tried for years to keep top secret: the market-share figures for Merck products among Medco clients," the Wall Street Journal reports. According to the documents, the Merck cholesterol treatment Zocor, one of the most expensive cholesterol medications on the market, represents 41% of the cholesterol-reduction treatments received by Medco mail-order clients, compared with a 22% national market share in December 1999. In addition, Merck hypertension treatments Prinzide and Prinivil had three times more market share among Medco mail-order clients than their national market share (Martinez, Wall Street Journal, 1/8). Medco spokesperson Anita Kawatra said that the company does "what every pharmacy benefit management company does" -- selects one or two preferred medications in each treatment class (New York Times, 1/8). In a regulatory filing in March 2002, Merck said that market share for Merck products among Medco clients was higher than their national market share, but the company did not cite an amount. In response to an FDA investigation of PBMs, Merck told the agency in August 1998 that Medco programs "are developed independently of Merck or other manufacturers and that Medco continues to operate in the interests of its clients, the payors for prescription benefits." In addition, Merck in 1998 signed an agreement with the Federal Trade Commission, which had found that "Medco has given favorable treatment to Merck drugs. As a result in some cases, consumers have been denied access to the drugs of competing manufacturers." According to the FTC, the "settlement would require Medco to take steps to diminish the effects of any unwarranted preference that might be given to Merck's drugs over those of Merck's competitors" (Wall Street Journal, 1/8).