Claritin Kickback Scheme
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
"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.