First $13.8 Million Of Mass. Proventil® Pricing Fraud Verdict Entered; More To Come

Late last week, Judge Saris, in a federal District Courtroom in Boston, signed an order entering about $13.8 million of the pending pricing fraud verdict (plus attorneys' fees -- yet to come) essentially against New Merck, as successor to Warrick Pharmaceuticals. Warrick is a former Schering-Plough subsidiary, and current subsidiary of the re-organized and renamed Schering-Plough (oddly enough, now called "Merck"). Warrick has been found liable for overcharging state payers for albuterol, which is the chemical name for Proventil^® -- an inhaled-drug that is now generic. Here is the full PDF file of the April 27, 2011 order (some 38 pages).

Still pending are all the punitive damages calculations -- we'll keep you posted. A bit from the order, then:

. . . .Warrick was incorporated as a wholly-owned subsidiary of Schering. Its function was to act a generic pharmaceutical manufacturer. Warrick was designed to “[p]rotect and extend the life cycle of [Schering’s] branded products as patents expire” and “create leverage in our Managed Care business,” through bundling brand and generic products. . . .

During the mid-1990s, Schering’s largest-selling drug was Proventil, a brand-name version of the drug albuterol that is used to treat asthma and other respiratory diseases. Patent protection for Proventil expired in late 1995. In order to prevent deterioration of albuterol sales after the launch of generic competition, Schering set up Warrick Pharmaceuticals to sell generic versions of Proventil. At issue in this case are three Warrick drugs: Albuterol Sulfate (.083%), Albuterol Sulfate (.5%), and an Albuterol inhaler (90 mcg). . . .

Warrick expected that this initial launch price would drop and provided “price protection” for its wholesale and retail pharmacy customers, meaning that if they purchased albuterol at $16.06 per unit and the price later fell, they would receive a rebate. Within six months, the price for the albuterol inhaler had fallen to $12 for all major wholesalers, and by May 2000 the price fell to $5.00 or less. Warrick did not report these price changes to MassHealth or to First DataBank. . . .

On November 3, 2009, Schering-Plough merged with Merck & Co., Inc. to form the world’s second-largest pharmaceutical company. . . .

So this is now Ken Frazier's inherited mess. Fabulous; thanks again, Fred.