Merck settles complaints that it overcharged Medicaid, pays $670 million

WHITEHOUSE STATION, N.J. When Merck recently released its expected 2008 earnings, the company tried to bury a $670 million charge it took to settle federal and state claims that the company overcharged Medicaid for prescription medicines, according to the Wall Street Journal.

Drug companies are suppose to sell drugs to Medicaid at the best price they offer to any customer. This is in relation to normal pricing which is, when a drug maker offers a steep discount of 90 percent or more to a hospital in exchange for a guaranteed market share of certain medication, but without informing Medicaid. The only exception to this rule is, selling drugs to charitable organizations.

Merck was first investigated for this back in 2002 and has been joined by 19 drug companies including GlaxoSmithKline and AstraZeneca.

On the plus, Merck said it would have a fourth quarter gain of $450 million from insurance proceeds related to the Vioxx liability litigation.