Attorney General's News Release

August 30, 2006

Nixon recovers more than $7 million in Medicaid fraud settlement with drug manufacturer Schering-Plough

Jefferson City, Mo. — Schering-Plough Corp., the manufacturer of the popular anti-allergy medication Claritin and several other prescription drugs, will pay more than $7 million to compensate the Missouri Medicaid program as part of a nationwide Medicaid fraud settlement, Attorney General Jay Nixon said today. Missouri was one of the lead states negotiating the settlement, Nixon said.

The settlement resolves allegations that the Delaware-based company's marketing and distribution practices of Claritin RediTabs and other drugs resulted in the Medicaid program paying too much in reimbursement in some cases and not receiving the full amount of rebates due in other cases.

“Medicaid fraud leaves taxpayers with the short end of the stick, so we've been dogged in our pursuit of those who try to defraud the system,” Nixon said. “This aggressive stance, particularly against pharmaceutical companies, has meant the return of millions of dollars to Missouri.”

Missouri's participation in the settlement will result in more than $7 million going back to taxpayers, Nixon said; more than $3 million of that amount will reimburse the Missouri Medicaid program, and the balance will go to the federal government for its Medicaid costs. Because interest is accumulating on the $91 million being paid to the states, the exact amounts won't be known until the payments are made.

The settlement involving the Medicaid fraud control units of Missouri and the other states, the U.S. Attorney's Office for the District of Massachusetts, several other federal agencies and Schering-Plough was submitted to the U.S. District Court in Boston on Tuesday (Aug. 29) for approval. The total recovery for the federal and state governments under the civil settlement is $255 million.

Schering Sales Corp., a subsidiary of Schering-Plough, also will enter a guilty plea to a federal charge of criminal conspiracy to make false statements to the Food and Drug Administration and to the Health Care Financing Administration (HCFA). Schering Sales will pay a $180 million criminal fine and be permanently excluded from participation in all federal health care programs.

The civil settlement resolves allegations that Schering-Plough misreported prices to the HCFA for the allergy medication Claritin RediTabs and for K-Dur, which is used to treat stomach conditions. The misreported prices meant the Medicaid programs were underpaid millions of dollars in rebates.

The state and federal governments also alleged that Schering-Plough engaged in kickbacks to physicians through marketing programs to induce them to prescribe certain of the company's drugs. The allegations also included concerns that Schering-Plough promoted “off-label”, or non-FDA approved, uses of other drugs in order to increase prescriptions for those drugs.

Under the proposed settlement, Schering-Plough must monitor and correct the shortcomings in its drug sales, marketing and pricing activities.

The Medicaid Fraud Control Unit of the Attorney General's Office, formed by Nixon in 1994, has authority under state law to investigate and prosecute, both civilly and criminally, allegations of fraud against Missouri's Medicaid Program. In 2005, the unit recovered more than $27 million for taxpayers in Medicaid fraud cases.

Inquiries from consumers should be directed to consumer@ago.mo.gov or 1-800-392-8222 (from within Missouri) or 573-751-3321 (outside Missouri).

All media inquiries should be directed to Press Secretary John Fougere.

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