By Phil Kabler
STAFF WRITER
 

State officials say the former prescription benefits manager for the Public Employees Insurance Agency cost the state about $6 million.

On Wednesday, the attorney general’s office filed suit against the New Jersey-based company, now called Medco Health Systems, in Kanawha Circuit Court for misrepresenting cost savings and for violations of state consumer protection law.

PEIA Director Tom Susman said Wednesday that negotiations with drug manufacturers during the establishment of the new multi-state pharmaceutical plan raised red flags about the company, then called Merck-Medco.

Under the contract with Merck-

Medco, PEIA was to receive the majority of any rebates from drug manufacturers.

Rebates to PEIA equaled 3 percent to 4 percent of costs during the two years of Merck-Medco’s contract, Susman said.

“The drug manufacturers were telling us they were paying [Merck-Medco] 15 [percent] to 20 percent rebates,” he said.

Susman said that amounts to roughly $6 million that Merck-Medco failed to refund to the state.

He noted that PEIA’s prescription drug costs soared during the two years that Merck-Medco was the prescription benefits manager, from July 1, 2000, to June 30, 2002. Costs went from $65 million the year before, to $85 million in the first year, and $108 million in the second year, he said.

“We would suggest ...they cost us significant dollars,” Susman said.

Last month, lawyers for Medco Health Systems sued PEIA, alleging that the company is owed $700,000 in “bonuses.” Under the contract, PEIA was to pay Merck 4 percent of any savings over 25 percent the first year, and 3 percent of any savings over 25 percent the second year.

Attorney General Darrell McGraw dismissed that case as a “slap suit” — a pre-emptive strike in anticipation of the PEIA suit.

“We do feel this has been an abusive process,” said McGraw. He believes the two cases will be joined in Kanawha Circuit Court.

Medco Health Systems spokesman Jeff Simek said Wednesday the company believes the facts will show that Merck “provided high-quality savings to the people of West Virginia.”

He said the company fulfilled all aspects of its contract with PEIA.

“Our contracts are very specific on the distribution of manufacturers’ rebates,” he said. “PEIA received all the manufacturers’ rebates it was entitled to under the contract.”

“West Virginia sued its previous pharmacy benefits manager, and they’ve had three managers in three years,” Simek said. “It seems it’s becoming a predictable but unfortunate pattern of behavior.”

PEIA’s suit also alleges that Merck-Medco revised PEIA preferred drug lists so its parent company, Merck & Co., would be more likely to manufacture drugs prescribed to PEIA patients.

Under state law, willful violations of consumer protection law carries fines of up to $5,000 per violation.

Susman said PEIA would argue that each of the 2.4 million prescriptions filled for PEIA insurees during the two-year contract constitutes a violation of the law.

To contact staff writer Phil Kabler, use e-mail or call 348-1220.

Write a letter to the editor.