Claritin Maker Coughs Up $346M

Claritin, Allergy, Allergic, Sneezing, Polen
CBS/AP
Schering-Plough Corp. will pay $346 million in fines and damages to settle charges that it paid a kickback to a big health insurer 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 the federal anti-kickback act and be banned from participating in federal health programs for five years, authorities said.

The settlement is the result of a five-year federal investigation into the company's attempts to market Claritin as the drug faced increasingly stiff competition from alternatives like Allegra. Ohio will get nearly $7.2 million from the settlement.

Prosecutors said that when Cigna Corp., one of the nation's largest health insurers, threatened to switch its patients to other, less expensive medications, Schering-Plough offered the company $10 million in incentives, plus an $1.8 million "data fee" for information did not actually 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.

"This wasn't a mistake. It was a marketing strategy. The result was that programs created to provide health care to the poorest among us were actually paying more for drugs than those who have private health insurance," he said.

The Kenilworth, N.J.-based company said that as part of the settlement it would pay a criminal fine of $52.5 million and civil damages of $293 million. Some of those damages, though, will be offset by credit the company will receive for $53.6 million in Medicaid rebates that it has previously paid.

The five-year exclusion of Schering Sales from federal health care programs won't effect the ability of its parent company to sell drugs to people in government health programs, authorities said.

"We are pleased that we are now putting this matter from the past behind us," said Schering-Plough senior vice president Brent Saunders.

The settlement stemmed from a whistle-blower lawsuit filed by three people who worked at a Schering-Plough subsidiary, ITG Inc.

Charles Alcorn, Beatrice Manning and Raymond Pironti Jr. filed the suit on behalf of the U.S. government under a Civil War era law that rewards private citizens for exposing attempts to defraud the federal government.

As part of the settlement, the trio and their lawyers will receive a nearly $31.7 million share from the damages that Schering-Plough will pay.

The investigation is just one of several around the country that have scrutinized marketing practices at major drug companies.

Bayer has paid $257 million and GlaxoSmithKline has paid $86.7 million to settle similar allegations that they failed to give their best prices to Medicaid.

Over the last two years, Schering-Plough has set aside $500 million to pay potential fines associated with its marketing practices.

On the New York Stock Exchange, Schering-Plough shares fell 7 cents to close Friday at $19.46 a share.

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  • David Hancock

    David Hancock is a home page editor for CBSNews.com.