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Steven=20 Cohen

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The Groundbreaking Nevada Decision

In April 2005, Mr. Steinke, the Relator in this case, filed a = suit=20 under the Nevada False Claims Act, N.R.S. =C2=A7 357.010 et = seq. This=20 suit focused on the allegations in the federal action that Merck = failed to=20 include so-called nominal price discounts on Vioxx=C2=AE and = Zocor=C2=AE in=20 calculating the States' rebates under the Medicaid=20 Rebate Act. Nevada intervened days after it was filed.

The suit accused Merck of fraudulently concealing three = different=20 discounts that it gave hospitals to promote Zocor=C2=AE and = Vioxx=C2=AE:

First, Merck concealed a discount known as a nominal price = discount=20 of more than 92 percent given to hospitals that met various = Merck sales=20 quotas or agreed not to use the drugs that competed with Vioxx = or Zocor.=20 Under this discount, hospitals paid less than 8 cents on the = dollar for=20 these drugs, which made the drugs nearly free.=20
Second, Merck concealed smaller, although still significant, = discounts.=20
Finally, Merck concealed large=20 give-aways of Zocor and Vioxx that had the same effect as = discounts,=20 but also were hidden from Medicaid.

Merck moved to dismiss the case and after nearly a year of = briefing=20 (from July 2005 to April 2006), the Court issued its groundbreaking ruling reported at Nevada ex = rel.=20 Steinke v. Merck & Co., Inc., 432 F. Supp. 2d 1082 (D. Nev. = 2006).

Merck argued that the Medicaid Rebate Act permitted its 90 = percent-plus=20 discount based upon the Act's definition of Best Price which = excluded=20 nominal prices.

Nevada and Steinke responded that the proper interpretation of = Best=20 Price requires that Merck include in its reports to Medicaid, = those=20 discounts that are tied to sales quotas or other requirements. =

The Court agreed, reasoning that that "a 'merely nominal price' = is a=20 price less than 10% of the AMP [Average Manufacturing Price] and = is not=20 tied to other conditions of performance or consideration in = addition to=20 the 'nominal prices.'" Id. at 1087. That is, Merck's so-called = nominal=20 price promotional sales of Zocor and Vioxx that were part and = parcel of=20 widespread marketing schemes to hospitals had to be included in = Merck's=20 calculation of Best Price and the rebates to the States. The = Court's=20 decision was the first published decision to interpret the Best = Price=20 provisions of the Medicaid Rebate Act.

Merck did not dispute that it had concealed the 92 percent-plus = so-called "nominal price" discounts in calculating Best Price or = its=20 rebates to the States. Consequently, in practical terms, the = Court's=20 decision left Merck with considerable exposure to owing the States = enormous rebates. Merck had paid some rebates to the States, but = they were=20 far short of what the States were owed.

The Court also made other notable, related rulings:

One, the Medicaid Rebate Act did not preempt Nevada and Mr.=20 Steinke's claim under Nevada's False Claims Act; and=20
Two, Nevada and Mr. Steinke could prosecute its claim that = Merck=20 should have included the free give-aways of stock bottles of = Zocor and=20 Vioxx among its discounts when it calculated and reported its = Best=20 Price.

The Nevada case was held in abeyance while the parties = discussed=20 settlement. The settlement that is the subject of this website = also=20 includes the Nevada case.

Significant Documents Filed in the Nevada Litigation

Relator's Initial Complaint: Unsealed When Nevada=20 Intervened, then Removed to Federal Court
Nevada's First Amended Complaint
Merck's Second Motion to Dismiss = Complaint
Nevada's Opposition to Merck's Second Motion to = Dismiss,=20 Joined by Relator
California, Delaware, Illinois, Texas, and D.C.'s = Brief in=20 Support of Opposition
Court Order Denying Merck's Motion to=20 Dismiss