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MONDAY, OCTOBER 23, 2006 (202) 514-2007

WWW.USDOJ.GOV TDD (202) 514-1888

Medco to Pay U.S. $155 Million to

False Claims Act Cases
WASHINGTON – Medco Health Solutions has agreed to pay the United States
$155 million plus interest to settle allegations that the Parsippany, N.J.-based
company submitted false claims to the government, solicited and accepted
kickbacks from pharmaceutical manufacturers to favor their drugs, and paid
kickbacks to health plans to obtain business, the Justice Department announced
today. Medco, the nation’s second largest pharmacy benefit management company,
manages the prescription drug benefits of over 60 million Americans, including
millions of Medicare beneficiaries.

The United States intervened in two qui tam or whistleblower cases filed by George
Bradford Hunt and Walter W. Gauger in 1999, and by Joseph Piacentile, M.D. in
2000. Both cases were later consolidated. The government’s complaint alleged that
Medco submitted false claims for mail order prescription drug services it was
required by contract to provide to millions of federal employees, retirees and their
families under the Federal Employee Health Benefits Program. Additionally, it is
alleged that the company cancelled valid prescriptions it could not timely fill in
order to avoid paying penalties under its contract; shorted pills from prescriptions it
filled; failed to conduct concurrent drug utilization review for all prescriptions in
order to identify potential adverse drug interactions; and, when filling prescriptions,
used drugs other than those prescribed by the physician to earn undisclosed rebates
from drug manufacturers.

The government complaint also alleged that the company violated the Anti-
Kickback Act by soliciting and accepting payments from pharmaceutical companies
to favor their products on Medco’s published list of drugs, and by paying kickbacks
to induce health plans to award contracts to provide the mail order pharmacy
benefits for plan beneficiaries.

The settlement also resolves the government’s claims against former Medco Vice-
President Diane Collins, who managed the Medco mail order pharmacy in Tampa,
Fla. Thecomplaint alleged that Collins had cancelled, and had instructed others to
cancel, valid patient prescriptions to cover up Medco’s failure to fill patient
prescriptions in the time required by the contract. As part of the settlement, the
relators in the consolidated case will receive $23 million as their share of the
government’s recovery, plus payment by Medco for their attorneys’ fees and costs.

Medco also agreed to settle a second qui tam action filed in 2003 by Karl S.
Schumann, another former Medco employee, alleging kickbacks by pharmaceutical
manufacturers to Medco. Mr. Schumann will receive $860,000 as his share of the
government’s recovery, plus payment by Medco for his attorneys’ fees and costs.
The United States and Medco also have settled a separate investigation by the
United States Attorney’s Office in Philadelphia, initiated in 2004, into false claims
to the Medicare program.

“Millions of federal employees and Medicare beneficiaries rely on pharmacy benefit

managers for their prescription drugs,” said Peter D. Keisler, Assistant Attorney
General for the Justice Department’s Civil Division. “Hidden financial agreements
with drug manufacturers and health plans can influence which drugs patients
receive, the price we all pay for drugs, and whether pharmacists serve patients with
their undivided professional judgment.”

As a condition of continued participation in government health programs, the

United States required that Medco enter into a corporate compliance agreement with
the Office of Inspector General, Department of Health and Human Services; and
with the Office of Inspector General of the Office of Personnel Management.
“Pharmacy benefit managers are ultimately accountable to their patients and these
agreements increase that level of accountability,” said U.S. Attorney for the Eastern
District of Pennsylvania, Patrick Meehan. “Pressure by an employer to reduce costs
and increase profits must never be allowed to coerce pharmacists into ignoring their
duties to patients.”

The case was handled by the Civil Division and U.S. Attorney’s Office for the
Eastern District of Pennsylvania within the Department of Justice, the Office of the
Inspector General of the Department of Health and Human Services, the Office of
Personnel Management, and the Defense Criminal Investigative Service.