U.S. Prosecutors Plan to Sue Medco

Federal prosecutors plan to sue Merck & Co.’s Medco Health Solutions Inc. unit, a manager of drug plans, alleging Medco improperly pushed expensive medicines and intentionally mishandled mail-order prescriptions.

U.S. Atty. Patrick Meehan of Philadelphia intends to intervene in two cases brought by three whistle-blowers, his office said in a statement. The government said it won’t pursue charges against Whitehouse Station, N.J.-based Merck.

Medco, with $33 billion in revenue last year, is the largest U.S. pharmacy-benefit manager in terms of sales.

Pharmacy-benefit managers, which act as middlemen between drug makers and health insurance plans, are the subject of several probes. New York State Atty. Gen. Eliot Spitzer in January said he was investigating whether Medco violated that state’s consumer-protection and pharmacy laws. Merck agreed five years ago to reduce the advantage Medco might give its medicines over rivals in a settlement with the Federal Trade Commission.

“The entire industry right now is under high scrutiny,” said Susan Cross, an analyst with Wilmington Trust, which holds 4.8 million Merck shares. “Now they have some issues they think they can sink their teeth into with Medco.”

The latest lawsuits, filed under the False Claims Act, allege improper pharmacy practices, violations of state pharmacy laws and inappropriate switching of patients to similar, more expensive drugs, the government said. The suits build on the allegations made by whistle-blowers.

In some cases, Medco destroyed patients’ mail-order prescriptions on particularly busy days to avoid penalties for delays, according to the government statement, which cites the whistle-blower complaints.

Medco also is accused of favoring Merck drugs when cheaper alternatives were available and mailing prescriptions with fewer pills than were ordered and paid for, the statement said.

“We will prove that the allegations in the whistle-blower complaints are absolutely untrue or reflect years-old, isolated issues that were identified and corrected and in no way, and at no time, compromised the quality of patient care,” Medco spokeswoman Ann Smith said.

Shares of Merck fell 78 cents to $62.11 on the New York Stock Exchange.