Schering-Plough Pays $55 Million to U.S., California and Florida — to Settle Drug Price Mark-Up Suits. . . .

At The Eleventh Hour, literally on the eve of a pending trial in the federal District Court in Massachusetts, Schering-Plough, and its subsidiary, Warrick Pharmaceuticals, have agreed to settle the potential financial exposures of each, in a series of actions brought by several states attorneys general, and the United States, claiming that Schering-Plough, and others, artificially inflated the wholesale price of many drugs each sold to Medicare or Medicaid, from as early as 1991 — to the present day.

Schering-Plough already (at the end of October 2008) paid $31 million to settle similar charges in Missouri — the largest such settlement ever, there. Earlier, Schering-Plough paid $27 million on similar actions in Texas.

Schering-Plough’s payments will be due within 15 days, by wire-transfer. It is $55 million:

. . . .The Relator on behalf of the United States contends that Schering and Warrick submitted, or caused to be submitted, false claims to the Medicaid Program. . . .

The Relator on behalf of the United States contends that Schering and Warrick submitted, or caused to be submitted, false claims to the Medicaid Program. As a result, the Relator contends that the United States has certain claims against Schering/Warrick. . . .

In separate actions brought by California and Florida, California and Florida also contend that Schering/Warrick submitted, or caused to be submitted, for payment by the Medicaid Program false, fraudulent, and excessive claims for reimbursement. . . .

In full and final settlement of all claims that were brought or that could have been brought by the Relator on behalf of the United States, and all claims that were brought or that could have been brought by the States of California and Florida, Schering/Warrick shall pay the sum of Fifty-Five Million Dollars ($55,000,000). . . .

Within fifteen (15) business days from the Effective Date of this Agreement, Schering/Warrick shall pay the Settlement Amount by wire transfer into an escrow account at Frontier Bank (“Escrow Agent”) in accordance with the terms of the separate Escrow Agreement. . . .

I believe there are similar actions still pending in at least 19 other states against Schering-Plough. If each of these settles at around $30 million per state, the “all-in” tab for this alleged overcharging will be north of $685 million.

Meanwhile, at least 16,000 people will lose their jobs — to improve Schering-Plough’s productivity and efficiency. Would it not have been a better business strategy to charge steady, fair prices to the government payors, right along — since 1991? I think so.

A federal Jury Verdict Form You’ll Not See Every Day. . . .

Curtain: Act Two [of a three-act-play -- click to enlarge]. . . .

Recall that Johnson & Johnson’s Centocor unit is in a pair of suits alleging, and defending, various claims of patent infringement — one in Texas, from 2007 — in which Centocor claims Abbott’s Humira infringes several of Remicade’s patents. In the other, pending in Boston, which was filed shortly after FDA approval of Simponi (a month or so ago), it is Abbott that claims Centocor has infringed some of Humira’s patents, in the sales and marketing of Simponi (golimumab), the Centocor follow-on to Remicade.

Centocor has clearly won the case in Texas — to the tune of $1.672 billion in jury-awarded patent-infringement (and royalties due) damages:

. . . .$1,168,466,000. . .

[plus]

$504,128,000. . . .

Wow. I do think this will embolden Centocor, and J&J, to very-aggressively pursue Schering-Plough, in the coming arbitration, over the reversion of Remicade and Simponi non-US rights. I think that is so, because Centocor is now flush with a sense of just how valuable this franchise will be, if Abbott’s Humira has to pay steep royalties to it, just to stay on the market at all. Centocor will certainly want to likewise aggressively control the future of Simponi, given that the Abbott suit (alleging Simponi infringes on Abbott’s Humira patents), in Boston, is still at least a couple of years away from a trial-date.

Were I Merck CEO Dick Clark, I’d seriously think about setlling early with Centocor/J&J — just to take the risk of a boxcar number (like this one, above) off the arbitrators’ table.