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U.S. hits Medco with fraud suit

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PHILADELPHIA — Federal prosecutors sued the nation's biggest pharmacy benefit-management company Monday, asserting that it ignored safety rules at its mail-order drug centers and pressured doctors to switch patients to medications made by its former owner, pharmaceutical firm Merck & Co.

The suit, filed in Philadelphia, accused Medco Health Solutions of a wide range of violations, including altering its records to avoid having to pay penalties on late deliveries, and failing to follow state laws requiring pharmacists to consult with doctors about certain prescriptions.

Medco officials called the charges either false or overstated.

"The full story will show that our people are highly skilled, our policies are rigorously enforced and our pharmacy practices, which are regularly inspected by state boards of pharmacy, lead our industry in lowering the cost of providing high-quality health care for millions of Americans," the company's chairman, president and chief executive officer, David Snow, said in a statement.

Medco, based in Franklin Lakes, N.J., acknowledged that some violations cited in the complaint occurred but said they were isolated incidents that happened years ago and have since been corrected.

Much of the suit deals with the operation of Medco's drug-switching program, under which the company examines what medication a patient is taking and looks for a less costly equivalent.

Prosecutors said the process has been corrupted by a series of deals under which the company accepted huge payments from pharmaceutical companies in exchange for favorable treatment. Medco received $430 million in such payments from Merck in 2001, the suit said.

"The primary reason Medco Health switches drugs is to enhance its revenue regardless of health plan costs, or of any potential adverse or life-threatening clinical outcomes to patients associated with the switch," the suit said.

Medco officials said the payments are simply rebates that lower the cost of the drugs. Any savings, they said, are passed along to customers. The company denied that the program ever compromised patient safety.

The suit also takes aim at Medco's mail-order pharmacies.

The government claims that when it could not meet productivity deadlines, Medco directed employees at mail-order centers in Florida, Texas, Nevada and Massachusetts to delete older prescriptions from its computer system, and then re-enter them as having been newly received. That way, the company could avoid paying late penalties to its clients, which are large employee health plans, the suit said.

Medco said the deletions happened without company approval and the employees who did it were caught and fired.