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Officials Attack Oxford-Medco PBM Deal

By Staff Writer

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NU Online News Service, Dec. 11, 2003, 10:06 a.m. EST – The U.S. Attorney’s office in Philadelphia has accused Medco Health Solutions Inc., Franklin Lakes, N.J., a pharmacy benefit manager, of using an $87.4 million kickback to win a PBM contract from an unnamed health insurer in 2001.[@@]

The officials have added the allegations to other allegations included in a whistleblower action that incorporates one whistleblower suit filed by pharmacists in 1999 and a second whistleblower suit filed by a doctor in 2000.

Oxford Health Plans Inc., Trumbull, Conn., has disclosed that it is the firm named in the amended complaint.

Oxford reported that it would be receiving a total of $87.4 million in payments from Medco in an annual financial statement that Oxford filed with the U.S. Securities and Exchange Commission in February 2002.

Oxford said it had entered into a 5-year agreement with Medco that began Jan. 1, 2002.

Medco agreed to pay $4.5 million to Oxford to “offset systems and other costs associated with implementation of designated services,” Oxford reported.

Medco also agreed to pay Oxford another $82.9 million over 5 years in exchange for Oxford providing historic claims information, current claims information, consulting services and other services, Oxford told the SEC.

Although Medco and Oxford disclosed the services agreement, the payments “were, in fact, intended to improperly influence the awarding of the pharmacy benefit management subcontract,” according to the amended complaint, which was signed by U.S. Attorney Patrick Meehan.

The complaint says the Oxford-Medco PBM deal involved 60,000 Medicare beneficiaries and numerous federal employees and dependents.

Medco says it will defend itself aggressively against the allegations in the complaint.

“The assistant U.S. attorney was aware that we were about to file a motion to dismiss the original complaint and that the whistleblowers, who provided the foundation for many of the allegations, had been discredited,” Medco General Counsel David Machlowitz says in a statement. “We expect to file a motion to dismiss the amended complaint by Dec. 30.”

Medco believes it has abided by the letter and spirit of all applicable laws in its business practices, the company says.

Meehan has posted his amended complaint at //www.usdoj.gov/usao/pae/News/Pr/2003/dec/Medcoamendedcomplaint.pdf

Medco has posted its response in the News & Pressroom section on its Web site, at http://www.medco.com