Feds' lawsuit tells tale of alleged past iniquities at Medco - Medco Health Solutions Inc

Drug Cost Management Report, Oct 10, 2003

U.S. Attorney Patrick Meehan's office has filed a complaint to intervene in two whistle-blower lawsuits against Medco Health Solutions, Inc. In responding to the suit, which was filed Sept. 29 in the U.S. District Court for the Eastern District of Pennsylvania, the PBM points to the propriety of its current operations. However, the suit's allegations seem to concern an earlier Medco and have caused some to question whether the company's past operating practices were as legitimate.

The intervention, announced in June (DCMR 7/25/03, p. 1), is the culmination of a more than four-year investigation, largely driven by the efforts of Associate U.S. Attorney General Jim Sheehan. The alleged violations stem from Medco's administration of mail-order prescription drug benefits for the Federal Employees Health Benefit Program under a contract with the BlueCross BlueShield Assn.

When asked if those audits had uncovered any violations, David Machlowitz, Medco's general counsel, replied that "nothing substantial that I'm aware of" had been found, "not during recent years at least. I mean, I frankly don't have knowledge about the mid-'90s." But an analyst remarked, "I think that's the point we're concerned about."

Present in the suit are familiar charges that Medco "over at least the past eight years" cancelled and destroyed prescriptions in order to meet contractual obligations, created false records of physician contacts by pharmacists to discuss substitutions, switched patients to more-expensive drugs made by its former parent, Merck & Co., Inc., and other violations. The lawsuit seeks unspecified damages and penalties as well as an injunction to change Medco's business practices.

Medco Sticks to Its Guns

The suit focuses in particular on violations that allegedly took place at Medco's Tampa, FL pharmacy. The alleged wrongdoing was driven by a culture of extreme pressure for general managers at Medco mail-order pharmacies to meet market-share quotas for drugs and contractual turnaround time requirements, the lawsuit claims. Complicating matters, the PBM recently said it had received an investigative subpoena issued by the Florida Attorney General's Medicaid Fraud Control Unit as part of an ongoing criminal investigation.

Machlowitz said during a conference call that "very few of the allegations have specific dates and places connected to them, with the exception of the Tampa discussion." Referring to the Tampa unit, Machlowitz explained "the vice president and general manager of that pharmacy--someone who we had already removed from her position--had been going in the dead of night to the pharmacy with a handful of people to change the received dates of prescriptions to make it appear that those prescriptions had been filled earlier."

As for the rest of the allegations, Machlowitz said they "are either false, overblown, or reflect an isolated incident here or there where employees did not do what they should have done." He added that the next step would be for Medco to move to have the case dismissed or for discovery to begin. If the latter occurs, the PBM will "seek again options to have the case thrown out, or if there's ever a reasonable accommodation that can be made, fine--we'll get it behind us," Machlowitz said.

Call Rich Manieri in Sheehan's office at (215) 861-8525 or Medco's Ann Smith at (201) 269-5984.