For Immediate Release
Media Contact: Bob Cooper
(208) 334-4112

Date: September 29, 2011

Wasden Settles Drug Pricing Case with Merck for $1.6 Million

(Boise) – Prescription drug manufacturer Merck Sharp & Dohme Corp., formerly known as Merck & Co., Inc., has agreed to pay $1.6 million in a legal settlement resolving Idaho’s claims relating to the “average wholesale prices” reported by the company, Attorney General Lawrence Wasden said.

Idaho Medicaid provides health care services, including prescription drugs, to low-income Idahoans.  By law, Idaho Medicaid must reimburse pharmacies at the “estimated acquisition cost” of the drug.  Idaho Medicaid primarily uses “average wholesale price,” as reported by drug manufacturers, as a basis for determining this amount.

If the manufacturer reports an inflated or false average wholesale price for a drug, taxpayers can pay too much for that drug through Medicaid reimbursements.  For example, one unit of Merck’s pharmaceutical product, Pepcid, had a published average wholesale price of $2.154 in 2003, but Wasden’s investigation revealed an actual average wholesale price of $1.714 in 2003.  This results in a 26% difference between the published price and the actual price.

“The publishing of false drug prices harms taxpayers and the State,” Attorney General Wasden said.  “My office has investigated and litigated this matter and what we uncovered is that in a very large number of instances, drug manufacturers reported false and inflated prices for their drugs.”

The $1.6 million settlement is intended to reimburse taxpayers for the excessive prices Idaho Medicaid paid for prescription drugs as a result of inflated average wholesale price reporting.  More than $360,000 will be deposited in the State’s General Fund to be appropriated by the Idaho Legislature.  $50,000 will go to the consumer protection account to reimburse the Attorney General for investigative and legal costs. More than $900,000 will go to the State’s Cooperative Welfare Fund and will be applied as a credit against the federal government’s next payment to Idaho Medicaid.  The federal government pays for approximately 70% of the cost of the Idaho Medicaid program.

The settlement with Merck has been approved by the Fourth District Court in Ada County.  The company admitted no liability or wrongdoing.

“This settlement addresses the harm incurred by Idaho’s taxpayers and the State,” Attorney General Wasden said.  “It should stop the reporting of false and misleading drug prices and provide the State significant financial relief.  This settlement is good for Idaho because it successfully resolves this dispute without the need for further, costly litigation.”

Since 2005, Wasden has resolved 11 average wholesale price cases with drug manufacturers, including this settlement, resulting in more than $15 million recovered.  Three average wholesale price cases, naming 17 other drug manufacturers, are still pending.

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