Company to settle payoff charges

A subsidiary will plead guilty to violating federal laws.
PHILADELPHIA (AP) -- Schering-Plough Corp. will pay $346 million to settle charges that it paid off an HMO to protect the price of its top-selling allergy drug, the company and federal prosecutors announced Friday.
A subsidiary of the pharmaceutical company, Schering Sales Corp., will also plead guilty to violating federal laws against kickbacks and be banned from federal health programs for five years, authorities said.
The announcement came on the same day that another pharmaceutical maker, Bristol-Myers Squibb Co., said it would pay $300 million to settle a class-action lawsuit claiming it made overly optimistic statements about a cancer drug to protect its investment in the drug's marketing rights.
Charged shady accounting
That suit also charged shady accounting related to the company's 2002 announcement that it had overstated revenue between 1999 and 2001 by $2.5 billion.
The Schering-Plough settlement followed a five-year federal investigation into the company's marketing of Claritin as the drug faced increasing competition from alternatives like Allegra.
Prosecutors said that when Cigna, one of the nation's largest health insurers, threatened to switch its patients to less expensive medications, Schering-Plough offered the company $10 million in incentives, plus an $1.8 million "data fee" for information it did not need.
The agreement lowered the price of Claritin for Cigna and its customers but violated a federal law requiring drug makers to give their lowest prices to Medicaid, the government's health program for the poor.
Patrick Meehan, the U.S. attorney for eastern Pennsylvania, called the arrangement an "old-fashioned kickback" and a blatant attempt to evade Medicaid rules.
Fine and damages
The Kenilworth, N.J.-based company said it would pay a criminal fine of $52.5 million and civil damages of $293 million. The five-year exclusion from federal health care programs will only apply to Schering Sales, not its parent company, and will not limit Schering-Plough's ability to sell medications, authorities said.
Copyright 2004 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.