Like Several Of Its Large Peers, Merck Has Received A Civil Investigation Request From US DoJ -- Re Pharmacy Benefit Manager Contracts

Among others, Johnson & Johnson disclosed in its latest SEC filings that it too has received this sort of a civil request. Merck disclosed the request it received in its Q1 2016 SEC Form 10-Q, which filed overnight. It matters greatly that this is a civil as opposed to criminal investigative request -- thus presumably, even if it were to turn out badly (which is highly unlikely at this stage), it would not result in debarrment from governmental programs. In general, most government payers expect that they will end up paying at a no worse (nor a better) rate, than a pharma company's best customers. The trick is in figuring out what that might mean, in actual day-to-day practice, with many many layers of contracting -- between the manufacturer (like Merck), and the final buyer.

In the main, it looks like the capable AUSAs in the Southern District of New York are just gathering industry background data (using the big R&D pharma companies as a reference point) -- to sort out how pharmacy benefit managers (via these complex contracts) impact the final price a consumer or insurer or government pays for a given drug. [Note that Valeant and Turing are the subjects of much more far reaching versions of these requests -- and I think the Valeant ones haven't yet ruled out a criminal process.] Even so, the focus may well be on the PBMs, and not on these traditional (i.e., non-Valeant, non-Turing) pharma companies, like Merck and J&J, themselves.

In time we shall see -- but I would not be too terrribly concerned about it all. Merck has responded to several similar requests in the past decade, and not much came of those. Merck is not Valeant or Turing -- that much is clear. In any event, we will watch it -- and here is the operative quote from page 19 of the SEC Form 10-Q, filed overnight:

. . . .The Company has received a civil investigative demand from the U.S. Attorney’s Office for the Southern District of New York that requests information relating to the Company’s contracts with, services from and payments to pharmacy benefit managers with respect to Maxalt and Levitra from January 1, 2006 to the present. The Company is cooperating with the investigation. . . .

Onward -- we will keep you apprised. Definitely smiling now. . . .