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Drug Companies Getting Caught Red-Handed

If you want to know just how far those mega-billion pharameuticals will go to maintain their marketshare, a $345.5 million settlement announced late last week sure sounds like a lot of money to me. That's the amount it took for Schering-Plough to resolve a government Medicaid investigation. Last year, Bayer and GlaxoSmithKline paid $257 and $86.7 million, respectively, to settle similar allegations.

During the late 90s, the popular Claritin generated billions of dollars in sales for Schering-Plough, and the company poured tens of millions of dollars into consumer advertising. Two of its large customers, insurers Cigna and PacifiCare Health Systems, were threatening to steer their members to a much cheaper competitor, Allegra, unless Schering-Plough lowered Claritin's price.

After Schering refused, it offered both insurers deals that prosecutors say resulted in Cigna's and PacifiCare's effectively paying less than the drug maker demanded from Medicaid, the federal and state health program for the poor. Federal law requires drug makers to offer their lowest prices to Medicaid.

In the lawsuit brought against Schering-Plough, prosecutors outlined the great lengths to which the company went to try to offer these customers discounts without seeming to lower a drug's price. The $10 million package offered to Cigna involved what was described as "nothing more than an old-fashioned kickback," a payment of $1.8 million that was described as a "data fee" for information that Schering was already getting.

Wilmington Star News August 1, 2004

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