July 30, 2004
Schering-Plough will pay the federal government and 49 states $282 million to settle a Medicaid fraud case involving its Claritin allergy drug. The company will also plead guilty to criminal charges of violating the Anti-Kickback Statute and pay the federal government a $52 million fine, U.S. Attorney Patrick Meehan said.
Schering-Plough defrauded Medicaid, a health insurance program for the poor administered by the federal government and the states, by failing to report the correct "best" or lowest price for its Claritin allergy drug, as required by law.
The company granted secret discounts on Claritin to two large HMOs, Pacificare and CIGNA, but failed to include the data in calculating the drug's "best" or lowest price. As a result, the best price reported to Medicaid was higher than the true best price, resulting in smaller rebates to the states and the federal government.
Schering-Plough gave Pacificare and CIGNA price breaks on Claritin after the HMOs threatened to drop the allergy medicine for a cheaper drug. The company hid the discounts by providing them to the HMOs in the form of "fees," interest free loans, price breaks on other medications and side agreements.
"Schering-Plough's Claritin con has been exposed and stopped: this drug company proved allergic to lawful, fair business practices boosting sales of its allergy drug Claritin through a scheme of concealed discounts," Connecticut Attorney General Richard Blumenthal said.
"The company defrauded Connecticut, other state and federal taxpayers of hundreds of millions of dollars and now must pay. The company resorted to a cynical subterfuge, creating a complex scheme to deceive federal and state officials. Phony fees, fake agreements, false loans, all were intended to further fatten the company's profits at consumers' ultimate expense. This scheme is enough to make anyone gag and choke."
The U. S. Department of Justice and the National Association of Medicaid Fraud Control Units, an anti-Medicaid fraud coalition of state officials, also took part in the investigation of the scam and resulting settlement.