Washington State

Office of the Attorney General

Attorney General

Bob Ferguson

Feb 7 2008

OLYMPIA - Attorney General Rob McKenna in conjunction with 48 other states, the District of Columbia and the federal government, today announced a settlement with Merck & Co., Inc. Merck is the manufacturer of the drugs Zocor, Vioxx, and Pepcid. The announcement resolves allegations that the company failed to pay rebates due state Medicaid Programs under the Federal Medicaid Drug Rebate statute. Washington will receive more than $7.4 million as part of two separate global settlements totaling $649 million.

Under the settlements, Merck has agreed to enter into a Corporate Integrity Agreement with the United States Department of Health and Human Services’ Inspector General. The Corporate Integrity Agreement will include provisions that will ensure that Merck will market, sell and promote its products in accordance with all Federal health care program requirements. Merck did, however, begin voluntary compliance initiatives associated with their sales and marketing activities prior to learning of the government’s investigation of the conduct associated with these settlements.

“This is a great win for the people of Washington,” McKenna said. “This settlement reaffirms our position that we will not stand by and allow a pharmaceutical company to avoid paying rebates by creatively interpreting the rules to benefit its own marketing efforts. I hope that this sends a message to other companies that may attempt to avoid paying rebates to our state’s Medicaid Programs.”
Pharmaceutical manufacturers that supply products to Medicaid Recipients are required by the Federal Medicaid Drug Rebate law to give the Medicaid Programs the benefit of the best available price for those products. The manufacturers are required to file “best price” information with the Centers for Medicare and Medicaid Services (CMS).  This information is then used to calculate rebates to be paid by these manufacturers to the state Medicaid Programs. In general, the lower the “best price,” the higher the rebate obligation. The federal law requires the “best price” reported by the manufacturers to include discounts.  However, prices that are considered “merely nominal” are exempted from the reporting requirement. The states have maintained that “merely nominal” means the discounted price is not tied to any conditions, such as volume purchase requirements or market shares.

The National Association of Medicaid Fraud Control Units conducted the settlement negotiations on behalf of the states, with representatives of the Nevada, Illinois, Delaware and Massachusetts Medicaid Fraud Control Units leading the effort.


Media Contact: J. Ryan Shannon, Media Relations Manager, (360) 753-2727