Oregon Department of Justice

Attorney General Ellen F. Rosenblum

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OR DOJ To Receive $800,000 In Multi-State Settlement Against Medco Health Solutions

April 26, 2004

Attorney General Hardy Myers today settled a $29.3 million, multi-state case against one of the nation's largest pharmacy benefits managers (PBM) for allegedly violating 20 states' consumer protection laws with its "drug-switching" practices. Named in the complaint and settlement agreement filed today in Marion County Circuit Court are Medco Health Solutions, Inc. of Franklin Lakes, New Jersey and its predecessor Merk-Medco Managed Care, LLC. The agreement admits no law violation.

Under the settlement agreement, Medco will pay the Oregon Department of Justice more than $800,000 for use in lowering drug costs and in support of its consumer protection program. The company also has agreed to major reforms of its business practices.

"Medco is one of the largest providers of pharmacy benefit management services in Oregon and nationwide and any changes that it makes for the good in its operations are expected to significantly reform the entire industry," Myers said.

Myers' Financial Fraud/Consumer Protection Section joined 19 other states in a two-year investigation of Medco's management of its health plan clients that serve over 62 million customers. The states' found that Medco encouraged doctors to switch patients to different prescription drugs by implying that the switch would benefit patients and their plans when in fact, the switch only benefited Medco.

In addition, doctors and their patients were never told that drug switching would increase rebate payments from drug manufacturers to Medco and that some switches would result in increased costs in follow-up doctor visits and tests.

The settlement prohibits Medco from soliciting drug switches when:

  • The net drug cost of the proposed drug exceeds the cost of the prescribed drug;
  • The prescribed drug has a generic equivalent and the proposed drug does not;
  • The switch is made to avoid competition from generic drugs; or
  • It is made more often than once in two years within a therapeutic class of drugs for any patient.

The settlement requires Medco to:

  • Disclose to doctors and patients the minimum or actual cost savings for health plans and the difference in co-payments made by patients;
  • Disclose to doctors and patients Medco's financial incentives for certain drug switches;
  • Disclose to doctors material differences in side effects between prescribed drugs and proposed drugs;
  • Reimburse patients for out-of-pocket costs for drug switch-related health care costs and notify patients and doctors that such reimbursement is available;
  • Obtain express, verifiable authorization from the doctor for all drug switches;
  • Inform patients that they may decline the drug switch and receive the initially prescribed drug;
  • Monitor the effects of drug switches on the health of patients; and
  • Adopt a certain code of ethics and professional standards.

The settlement provides for a $2.5 million fund to reimburse consumers whose statin (cholesterol lowering) drugs were switched by Medco. Consumers will be eligible to receive up to $25 each to cover statin switch-related medical costs.

Oregon will receive $403,000 in cash or $504,000 in pre-paid generic drug cards to be used to benefit low income, disabled, or elderly consumers of prescription medications and/or to promote lower drug costs for residents of Oregon.

Myers' office was a key player in the multi-state investigation, developing the case and providing extensive technical analysis and so will receive an additional $410,000 for its Consumer Protection and Education Fund. Lead states in the case were Massachusetts, Maine and Pennsylvania.

Consumers wanting information on the settlement may call the Attorney General's consumer hotline at (503) 378-4320 (Salem area only), (503) 229-5576 (Portland area only) or toll-free at 1-877-877-9392. Justice is online at www.doj.state.or.us.


Jan Margosian, (503) 947-4333 (media line only) jan.margosian@doj.state.or.us |
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