Medco Health Solutions Inc. on Wednesday defended itself against a new charge it made improper kickbacks to win a contract to provide pharmacy services to Medicare beneficiaries and federal employees.
Medco said its contracts with Oxford Health Plans Inc. were legal and proper, despite a new U.S. Justice Department complaint charging Medco with making $87.4 million in improper payments to win business.
Medco acts as a middleman between drugmakers and insurers in an attempt to lower the costs of prescription drugs.
In a wide-ranging whistleblower lawsuit being prosecuted by the U.S. Attorney in Philadelphia, the pharmacy benefits manager is accused of accepting and making improper payments and destroying patient prescriptions to boost profit.
The prosecutor on Tuesday added a new charge that Medco sought in 2001 to "improperly influence" its bid to get a contract with a health plan to provide pharmacy services to 60,000 Medicare beneficiaries and federal employees.
Oxford, which acknowledged it is that plan, denied it got improper payments from Medco.
"The U.S. Attorney has shown a track record of aggressively pursuing the Medco matter," said Oxford spokesman Gary Frazier. "We think that our agreements are legal and appropriate."
U.S. Attorney Patrick Meehan said Medco paid the health plan $87.4 million in return for services that "were in fact intended to improperly influence the awarding of the pharmacy benefit subcontract."
Medco said it will file a motion by Dec. 30 seeking dismissal of the lawsuit.
"There were two separate agreements" between Medco and Oxford, Medco spokesman Jeff Simek said.
"There was a pharmacy benefits manager agreement for services we provide to Oxford, and the second was a special strategic relationship that included compensation for services Oxford provided that created significant value for us."
Simek said the second agreement included providing data to Medco and other services that allowed Medco to develop its clinical strategies.
"It's a little strange and late in the game, because this has been disclosed and talked about" for years, said Robert Mains, an analyst who covers Oxford at Advest Inc.
Shares of Medco dipped 11 cents to $36.12, and shares of Oxford fell 82 cents, or 1.8 percent, to $44.49, both on the New York Stock Exchange.
The government in the suit also accuses Medco of switching patients to more expensive drugs, shortchanging patients on pills and destroying records to meet contract deadlines.
