Former Michigan District Manager Dean Steinke net $68-million in Whistleblower Suit

Merck To Pay $670 Million Over Medicaid Fraud
February 7th, 2008 12:10 pm By Ed Silverman
The drugmaker failed to pay the appropriate rebates to Medicaid and other goverment health care programs, and also paid kickbacks to doctors and hospitals to induce them to prescribe various meds. The allegations were brought in two separate lawsuits filed by whistleblowers under the False Claims Act. Merck has also agreed to a Corporate Integrity Agreement, which means good behavior is now required for the next five years.

“Not only is the combined recovery in these two cases one of the largest healthcare fraud settlements ever achieved by the Justice Department,” says Attorney General Michael Mukasey, in a statement, “it reflects our continuing effort to hold drug companies accountable for devising pricing schemes that deliberately seek to deny federal health care programs the same lower prices for drugs that are available to other commercial customers.” Here is the statement from Merck, which signaled this deal two months ago by discussing a $670 million charge to cover investigations into Medicaid marketing.

The Medicaid Rebate Statute requires drugmakers to report their “best prices” and other pricing info to the government in order to ensure Medicaid obtains the same discounts and concessions given other customers. An exception to this rule allows drugmakers to exclude from the prices they report any discounted prices that are “nominal” in amount. Merck improperly termed as “nominal” the prices it offered to hospitals to boost their sales and excluded those discounts from the prices it reported to the government, according to the Justice Department.

H. Dean Steinke, a former Merck district manager in Michigan, alleged in his suit filed in Philadelphia that Merck violated the Medicaid Rebate Statute in connection with its marketing of its drugs Zocor, Mevacor and Vioxx. Merck allegedly offered deep discounts for the two drugs if hospitals used large quantities of those drugs in place of competitors’ brands.

Here’s a timeline that traces the origins and development of the case…


Steinke’s suit further alleged that from 1997-2001, Merck had approximately 15 different programs used by its sales reps to induce docs to prescribe i ts drugs. These programs primarily consisted of excess payments to dcos that were disguised as fees paid to them for “training,” “consultation” or “market research.” In fact, the government alleged that these fees were illegal kickbacks intended to induce the purchase of Merck drugs. Merck agreed today to pay $399 million plus interest to settle the Medicaid Rebate as well as the kickback allegations.

In a separate suit filed by physician William St. John LaCorte in New Orleans, Merck was charged with creating a marketing scheme in which it provided substantially reduced prices for the Pepcid heartburn med once hospitals agreed to primarily use the drug instead of a rival pill. Merck allegedly offered these incentives to hospitals in order to obtain spillover business when patients would continue to purchase Pepcid once he or she was discharged.

Merck improperly termed as “nominal” the prices it offered to hospitals to boost Pepcid sales, excluded those discounts from the prices it reported to the government, and thus effectively denied the government the benefit of these lower prices. Merck agreed today to pay $250 million plus interest to settle these allegations.

Under the two settlement agreements, the federal government will receive more than $360 million, and 49 states and Washington, DC, over $290 million. The interest brings the payout from $650 million to about $670 million. In addition, Steinke will receive $44.7 million from the federal share of the settlement amount and an additional $23.5 million from the states. Similarly, Dr. LaCorte will receive a share of the proceeds from the federal and state settlement amounts under their respective qui tam statutes.

“Our health insurance programs rely upon the integrity of health providers, including pharmaceutical manufacturers, when they report to the government programs which reimburse their products and services with scarce funds,” says Pat Meehan, the US Attorney in Philadelphia, whose office led the investigation of the Steinke suit.

 

Congratulations Dean!

Dean was the best manager I have ever had the pleasure of working with in my 25 year sales career. He has outstanding business acumen and did his best to mold his reps for success.

Dean invited reps into his home for training sessions and always made himself available to discuss work or personal issues 7 days a week. It was unfortunate that some higher management drove him out of the organization after his years of loyalty and due diligence in developing some outstanding reps who have moved up in the ranks. What goes around - comes around!

Thanks Dean for your positive influence on my career and best wishes on your immediate retirement. Enjoy your lifelong financial security. Your stepping forward and speaking up should be a wake up call for the entire industry to deal ethically with customers and employees alike.
RC

 

Merck Whistleblower Wins $68M Award
By MARYCLAIRE DALE

PHILADELPHIA (AP) — A sales manager who "just couldn't abide" by the way Merck wanted him to market the drugs Vioxx and Zocor to doctors took the lonely step of filing a whistleblower suit against his employer.

Seven years later, Merck & Co. will pay $671 million to settle complaints it overcharged government health programs and gave doctors improper inducements to prescribe its drugs.

And whistleblower H. Dean Steinke, the Michigan sales manager whose lawsuit led to about $400 million of the recovery, gets a $68 million reward.

"He did it because he really, truly thought that Merck was doing the wrong thing and he just couldn't abide by it, even though he was putting his career on hold," said Steinke's lawyer, Steven Cohen of Chicago. His small firm, which specializes in such cases, will receive an undisclosed share of the award.

Steinke, who through his lawyer declined an interview, had climbed the sales ladder at Merck for about 12 years and was a district sales manager when he filed the lawsuit. He made the move only after his internal complaints were ignored, Cohen said.

Steinke believed that Merck, as it introduced the much-anticipated painkiller Vioxx and tried to ward off competition for Zocor, an anti-cholesterol drug, had crossed the line when it came to inducements to physicians.

The government investigated his sealed lawsuit, which also alleged that Merck overcharged government health plans, under the Federal False Claims Act.

Prosecutors ultimately alleged that Merck paid physicians, hospitals and others excess fees to run supposed educational programs, from lunches to speaking engagements to visiting professorships, in hopes they would favor their products.

Prosecutors also accused Merck of giving doctors and hospitals steep volume-based discounts on Vioxx, Zocor and Pepcid, in the hope that patients would come to rely on them. The company failed to offer Medicare and other government agencies the same price, as required by law, they said.

"It's heroin-dealer economics. Your first shot of dope is free and then it's more expensive," said Pat Burns, a spokesman for the whistleblower group Taxpayers Against Fraud.

As part of the agreement, Merck denied any wrongdoing.

Steinke left Merck a month after he filed his lawsuit in December 2000 and went to work for a small pharmaceutical company that shared his values, Cohen said. He made repeated trips to Philadelphia to help government investigators.

"The whistleblower is stuck in a very lonely and isolated circumstance while the government's investigation is proceeding," Cohen said.

His award includes $44.7 million from federal agencies — roughly 20 percent of the government's recovery — and about $23.5 million from various states, Cohen said.

The remainder of the settlement announced Wednesday stems from a lawsuit filed by a New Orleans doctor, William St. John LaCorte. His award had not yet been determined.

Cohen described Steinke, who is married with no children, as a reserved man from "good midwestern stock."

He recently left his drug-company job.

 

http://www.drugfraudsettlement.com/

 

http://news.google.com/news?sourceid=navclient&ie=UTF-8&rlz=1T4HPIA_en___US232&hl=en&resnum=1&ct=title&ncl=1129592395

 

Way to go Dean !
At least one of us was able to make the so called Merck Machine listen. I left as well, & have been wiser for having done so.

 

Awesome Dean! How about that, doing the right thing does trump in the end.

 

Merck to Pay $650 Million In Medicaid Settlement

By Carrie Johnson
Washington Post Staff Writer

Merck agreed yesterday to pay more than $650 million to settle charges that it routinely overbilled the government for its most popular medicines, the arthritis drug Vioxx and the cholesterol drug Zocor, cheating Medicaid out of millions of dollars in discounts over eight years.

Prosecutors say the drugmaker gave pills to hospitals at virtually no cost to hook poor patients on expensive medicine. When the patients left the hospital, they often continued taking the drugs, but with the government footing the higher bill.

The Merck settlement culminates an investigation that began in 2000 and is one of the first in a series of cases centering on whether drugmakers used unfair pricing practices to bilk the government. The Justice Department is looking into 630 health-care whistleblower claims.

H. Dean Steinke, a district sales manager for Merck, set off the investigation after he noticed his company was using questionable sales tactics. Steinke complained to his supervisors, who brushed him off, so he turned to federal authorities.

Steinke, a 51-year-old Michigan native, will receive about $68 million from the settlement as a whistleblower reward. He said he was prompted to go to authorities after his direct supervisor told him: "I don't care how you do it, but get the damn business," when he questioned the sales practices. "There comes a time when you just dig in your heels and say, 'You know what? They're not going to get away with it,' " Steinke said.

The agreement yesterday, one of the largest health-care fraud recoveries, also closes a related case about Merck overcharging for the antacid Pepcid. William St. John LaCorte, a doctor in New Orleans who questioned the Pepcid charges, will receive a yet-to-be-determined share of the settlement proceeds.

Merck did not admit wrongdoing. The country's third-largest drugmaker stood by its pricing strategies but wanted to resolve the disputes, executives said in a statement. Merck agreed to heightened oversight by regulators for five years as part of the deal. The company remains the focus of a separate grand jury investigation related to Vioxx marketing and is striving to execute another multibillion-dollar settlement of thousands of lawsuits filed by people who had heart attacks after taking the painkiller.

The whistleblowing case centered on Merck's giving hospitals across the country 92 percent discounts on Vioxx, an arthritis drug pulled from the market three years ago for safety concerns; Zocor, a popular cholesterol-lowering medicine that drew intense competition from rivals; and Pepcid, an antacid tablet now sold over-the-counter. Merck offered the pills at the discount under a legal loophole, known as nominal pricing, that Congress created a generation ago to give poor patients access to medicine.

Merck and industry experts had argued that the pricing strategy fell within the law and helped reduce costs for many government-funded hospitals. But prosecutors said the Whitehouse Station, N.J., drugmaker used the discounts to outflank its competition, offering massive markdowns to hospitals that agreed to put its medicines on a list of preferred drugs or to prescribe them for as many as three-quarters of eligible patients. In some cases, hospitals favored Merck's drugs over cheaper generics. This practice conflicted with the law because Merck did not offer Medicaid the same discounts, authorities said. The law requires the government be charged no more than other customers.

"The company perceived a loophole and tried to drive through that loophole," said L. Timothy Terry, who leads Nevada's Medicaid Fraud Control Unit and who played a central role in the case. "I think they were exploiting these programs."

The pricing allegations cover bills paid by federal Medicaid plans and plans for states from California to New York. Patrick Burns, a spokesman for Taxpayers Against Fraud, a nonprofit group that supports the pursuit of such cases, said the settlement calls attention to an improper business strategy that has been used by as many as a dozen other drug companies.

"It's heroin-dealer economics," he said. "Your first shot is for free, and after that it becomes more expensive . . . not to the hospital but to Medicaid, which is paying the bill."

Congress tightened the nominal pricing loophole at issue in the Merck case, but prescription drug costs continue to rise steadily, a major issue for presidential candidates jockeying to present health-care reform plans. Meanwhile, on Capitol Hill, such key lawmakers as Sen. Charles E. Grassley (R-Iowa) and Rep. Henry A. Waxman (D-Calif.) are pressing government administrators for better oversight of drug spending.

But, as the Merck investigation underscores, the road to financial recovery for the government and for the whistleblower is not always clear, or direct.

The Merck case had been quietly proceeding under court seal since December 2000, after Steinke came forward in Michigan. He initially worried that Merck's sales campaigns ran afoul of laws that prohibit kickbacks to doctors and hospitals. Over time, the case expanded into a deeper examination of whether Merck had complied with rules requiring manufacturers to offer federal and state agencies their "best price" on drugs.

Steinke took his case to Steven H. Cohen, of Chicago, and Mark Allen Kleiman of Santa Monica, Calif., lawyers who regularly handle whistleblower cases. Together, they filed a lawsuit and waited to see whether federal prosecutors in Philadelphia would intervene, which would have strengthened their case and potentially offered a big financial reward under the False Claims Act. More than three years passed with no clear word from government officials in Philadelphia or Washington about the Justice Department's interest in the case. Then Cohen and Kleiman learned that personnel changes in the U.S. attorney's office meant they needed to introduce new officials to the complex issues and the 10,000 pages of documents Steinke had compiled.

Sitting down with a new, skeptical lead prosecutor in 2004 marked a low point, the lawyers recalled. The allegations were too complicated, the prosecutor said, and the case was too difficult to prove. The lawyers reluctantly agreed with her.

"It was gut-wrenching," said Kleiman, a former health-care executive who attended law school after his own negative experience with corporate corruption.

"This will be called the worst day in our life," added Cohen, a former congressional staff member and the son-in-law of retired D.C. federal appeals court judge Abner Mikva.

Their mood lifted weeks later, when they bumped into a Nevada health-care official at a conference and he invited them to discuss their case. Steinke and the lawyers traveled to Carson City, Nev., where Deputy Attorney General Tim Terry told them he was interested. "Tim was a real advocate for us, immediately," Steinke said. By then he had left Merck and joined another pharmaceutical company. Eventually, he got out of the business.

Steinke's thick brown hair turned gray as he spent weeks of vacation time sitting in conference rooms in Philadelphia and Carson City, poring over 440 boxes of documents to help prosecutors make sense of the scheme. To decompress, he built a wooden deck in his backyard. The construction project consumed seven years.

Steinke, who has an undergraduate degree in fisheries and wildlife biology, said he has not drafted a blueprint for his future. He has a notion, though, to start a rehabilitation center for wounded animals with some of his settlement proceeds. For him, he said, the issue was not one of money but of principle.

"Sometimes you just get so frustrated about things that are wrong," he said. "These are the things that drive you, and you're not going to stop until things are resolved."

 

Whistleblowing & The Steinke Effect
Whistleblower as pariah might be changing. Call it The Steinke Effect.

H. Dean Steinke, who had been a Merck district sales manager, blew the whistle on pricing and kickback schemes. Normally, that would have made him an outcast in his profession, unemployable, and his motives scrutinized. To today, national opinion is mixed about the decision of Deep Throat to out the Nixon Administration.

Things might turn out differently for Steinke. That's because Merck is a severely wounded player in a hobbled industry. Had Steinke ratted on Google or any company in the high-tech sector he might have been cast as the enemy of progress. In addition, the national mood is one of fear and angst about money. The alleged machinations Steinke disclosed are all about money. There were no safety questions.

And given our current preoccupation with money, Steinke might be a subject of downright envy. For his whistleblowing efforts he will receive $68.2 million as his share of the federal and state settlements.

Third, his actions are being positioned as a deterrent to future illegal or unethical conduct by BigPharma. In THE WALL STREET JOURNAL article on the Merck settlement, Sarah Rubenstein and Avery Johnson don't cast Steinke as a hero but as a reality that drug companies have to now take into account when they conduct business. The reporters quote Steinke's attorney Steven Cohen, Cohen Law Group in Chicago. Cohen observes, "This case sends a message to drug companies that they need to listen to their employees when they say something they do is wrong. They need to listen because the next step for these employees is the government."

One immediate impact of The Steike Effect could be that all companies in all industries will establish or improve a system for employees to report possible wrongs in an anonymous, penalty-free manner. That kind of infrastructure might help the company if it does wind up in litigation or has a hit to its reputational capital by scandal. In fact, boards of directors and shareholders might demand that.

 

Merck to Pay $671 Million to Settle Whistleblower Suits
Shannon P. Duffy
The Legal Intelligencer

Merck & Co. has agreed to pay more than $671 million to settle a pair of whistleblower lawsuits that claimed the company used improper marketing tactics, including kickbacks to doctors, to encourage them to write more prescriptions for its most profitable drugs, like Vioxx, Zocor and Singulair.

The two settlements were announced by federal prosecutors in Philadelphia and New Orleans.

A settlement of almost $400 million in the Philadelphia case stems from a seven-year investigation that began when H. Dean Steinke, a former Merck district sales manager, blew the whistle by filing claims under the False Claims Act that alleged Merck was using several illegal marketing practices. Steinke -- who was represented by attorneys Steven H. Cohen of Chicago, BethAnne Yeager of Madison, Wis., and Mark Kleiman of Santa Monica, Calif. -- will be paid a reward of nearly $44.7 million, prosecutors said.

The $250 million settlement of the Louisiana case stemmed from a whistleblower suit brought by William St. John Lacorte, a physician who alleged that Merck gave steep discounts for Pepcid to hospitals that agreed to primarily use Pepcid instead of competitor drugs.

Prosecutors said both settlements include interest that will boost Merck's total payout to $671 million.

Under the terms of the Philadelphia settlement, federal agencies will receive $218 million and the 49 states with Medicaid programs and the District of Columbia will share $181 million.

The Louisiana settlement is similarly divided, with $137.5 million for the federal government and $112.5 million for the states. LaCorte's reward from the Louisiana settlement has not yet been decided, prosecutors said.

Merck, in a statement released Thursday, said it had admitted to no wrongdoing and that the company "believes its pricing and sales and marketing policies and practices were consistent with all applicable regulations and contracts during the relevant time." The statement also said that the marketing practices at issue in the suits had ended in 2001.

"What we have here is a disagreement [over] the rules of the Medicaid rebate program," said Merck spokesman Ronald Rogers. "These civil settlements were the best and most appropriate way to resolve these lengthy investigations and bring these matters to closure."

Eastern District of Pennsylvania U.S. Attorney Patrick Meehan said in a statement: "We are heartened when providers recognize problems and act affirmatively and comprehensively, as Merck did, to improve the systems they have to reduce fiscal demands upon federal and state health reimbursement." Meehan said Merck had cooperated with the federal investigation of its pricing, sales and marketing practices, and had significantly altered its physician remuneration sales practices and its compliance program even before learning of the investigation.

The Louisiana suit alleged that the Pepcid discounts defrauded Medicaid because drug manufacturers are required to file quarterly reports of the "best price" paid for drugs -- a figure that is used to calculate the Medicaid reimbursement rate. By failing to disclose the discounts it was giving to hospitals, the suit alleged, Merck maintained an artificially high best price and was therefore paid a higher price through Medicaid. The suit said Merck avoided its duty to report the discounts by relying on the "nominal price exception" in the Medicaid statute that allows manufacturers to give discounts to nonprofit organizations, like Planned Parenthood, without including those transactions in its calculation of its best price.

In the Philadelphia suit, Steinke also alleged that Merck was abusing the nominal price exception by giving steep discounts to hospitals so long as they purchased set amounts. The suit alleged that Merck excluded the large discounts by claiming that any discount of more than 90 percent qualified for the nominal price exception. But Steinke's lawyers said the legislative history of the Medicaid statute shows that the nominal price exception was intended to protect only special purchasers, like penny-a-pack birth control pills sold to Planned Parenthood.

Steinke's suit also accused Merck of paying kickbacks to doctors under the guise of marketing training programs such as "preceptorships," in which physicians were paid to allow a Merck sales rep to "shadow" them for half a day, and "tutorials," in which doctors were paid to listen to a Merck employee's presentation and then evaluate it. The suit said one physician was paid 22 times by Merck, at $250 a session, and seven times at $300 a session, for preceptorships.

Steinke's suit also alleged that Merck treated high-prescribing physicians to lavish vacations that the company termed "consultant meetings." One such consultant meeting was held in September 1998 at the luxurious Crystal Mountain Resort in Thompsonville, Mich., the suit said. During the event, the suit said, doctors were asked to serve as a Merck representative training consultant and to evaluate the sales message of Merck sales reps. In return, Merck paid each physician a $500 honorarium for the training and consultative services, Friday and Saturday nights' lodging expenses and an additional $100 for incidental expenses.

 

Re: Former Michigan District Manager Dean Steinke net $68-million in Whistleblower Su

Dean Steinke was one of the team that hired me in 1996 to sell Vioxx, Singulair, Fosamax etc in Traverse City. I am so heartened to hear this great guy has been rewarded for being one of the only honest human beings in the Merck organization. I spent many a day doing preceptorships, tutorials and roundtables at the insistence of my manager Sharon. I just knew it had to be illegal to pay these docs for their participation, but when mentioning it to my "cluster" mates, and then to my manager. I was told to never question this practice if I valued my job. As a single mom with four children, I shut-up for awhile, only to be fired 2 years later for mysteriously unexplained reasons.
To the monstrous "MERCK MACHINE," and the rest of you frickin chicken-shit Merck managers and reps who refuse to question blatant law-breaking: What goes around comes around.
Congrats Dean.

 

Re: Former Michigan District Manager Dean Steinke net $68-million in Whistleblower Su

all of this crap is a result of letting the stupid stupid stupid marketing weenies, all those arrogant assholes who have no experience standing in front of a doctor for more than 1-2 years and spouting some short 30 second blurbs, have any damn input.

I can't tell you how infuriating it is to listen to these slimeballs at meetings "when I carried the bag" "when I was a rep" (yeah when the environment was VERY different). they all have that generic slimeball look. that arrogant attitude, that "Im glad Im not a rep anymore" attitude. Yeah, guys, you have done some great shit for this company.

Then Pfizer squashed us in the statin market (these were the very weenies who launched zocor and were now in marketing positions inside) and they got PISSED. So they decided hey, instead of sticking to Merck's ethics and strength, lets try to fuck Pfizer, lets get back at those guys who crushed us with Lipitor, lets do the same thing to them with the Vioxx Celebrex wars that they did to us with the L/Z wars (only we want to win at any cost this time) I can just imagine them sitting around a conference room at WP thinking of ways to buy docs, "I know, lets call them "Preceptorships" just like doctors in training do. That way our reps can hang out all day with the doc and really get to know them. If we keep paying them, they will have to start writing our drug." GREAT FUCKING IDEA GUYS! Yeah, lets outright buy physicians. WE are Merck, we are above the law.

Does anyone remember the meeting where we had to chant "celebrex sucks"? I felt nauseated and dumbfounded that this is how low we were stooping. I called my wife that night and said, we are deep shit.

I don't know who these people are or were or if they are still with merck or not, but I do know that they contributed mightely to Merck losing its way, and to where we are now, and to the level of respect we currently enjoy. THey are probably floating around as business managers, the bullies and the micromanagers and otherwise nasty, ineffective talent we seem to employ.

I feel bad that this is what Merck will be remembered for. Its true we were not the only ones doing these things, but that still doesn't make it right. We should have known better. We should not let a bunch of pissed of jock heads make decisions that were not based on science.

 

Re: Former Michigan District Manager Dean Steinke net $68-million in Whistleblower Su

Well said!
One of these "weenies" you mentioned, who think they know the pharmaceutical field sales business because they have worked "inside" for 5 years, was, I swear to God, FROM PURCHASING. That was his ONLY experience at Merck. He was a fucking bean counter, and was given a Sales Manager's job in Michigan. He had never sold a thing, or managed people EVER. WTF?

 

So nice to see these bastards reaping the negative outcomes from their history of piss poor decisions and juvenile actions. Thank God I wasn't around to chant 'celebrex sucks' because I wouldn't have handled it too well. I had already witnessed enough to know it was time to leave in '97.

 

Way to go Dean! I don't even know you, but you are now officially the man. A very wealthy man at that!

I love that one individual, such as Dean, had two of the King Kong sized you know whats and the smarts to nail mighty Jerck and Company. And Dean laughed all the way to the bank! Poor Smerck and Company also was nailed with a 55+ million fine for bogus advertising with Vioxx as reported on the front page of the Wall Street Journal.

Couple that with the recent cardiovscular drug that was stopped in trials and the layoffs, and I too am Smirking like to many of the asses at Jerck and Company!

Dean you are a hero!

 

Dean,

Great Job!

 

This just proves that one better use extreme caution when Merck tells you anything. Merck was a wonderful place to work when you could rely on them to be totally truthful and honest and count on them to always do the right thing regardless of cost, because nothing was more important to Merck than always doing the right thing. That environment was destroyed back in the 90's and well, you know what we are like today. Now the "right thing" is left to the attorneys and well, you know what that has brung.....

 

Re: Former Michigan District Manager Dean Steinke net $68-million in Whistleblower Su

He also made his counterpart manager air-tight!!

The Great Cornholio!!!


Way to go - Brown-eye Dean "Stinky" Steinke

 

Dean - Congratulation on such a wonderful outcome. I know how hard you and your attorneys worked on this case and the many hours you worked in Philadelphia. Best wishes to you all and to a wonderful outcome.

Nikki

 

I was one of the original HSA's that prepped the market for the launch of Singulair in the 1990's. I was initially enthused to be working for Merck, but soon became convinced that, should its excellent new drug pipeline ever stop kicking out great products, that the company would be in serious trouble. When almost all of the HSA's were switched to sales reps, I left the company in disgust.

It in no way makes me happy to be proven correct. Best of luck to everyone still employed in this industry. After years of trying very hard, it appears that the morons running Pharma have succeeded in killing the goose.