Published Online: Wednesday, February 1, 2006

In a key legal blow to the pharmacy benefit management (PBM) industry, a jury in Ohio ruled that PBM giant Medco Health Solutions must pay $7.8 million to the State Teachers Retirement System of Ohio because of fraudulent activities. The verdict came in response to allegations that Medco overcharged the retired teachers for generic drugs and illegally failed to pass on rebates received from pharmaceutical manufacturers.

In addition to pocketing secret drug manufacturer rebates, the complaint charged that Medco used secret payments to manipulate the company's formulary committee. The PBM also was accused of switching patients to a Medco mail-order pharmacy and then charging them more for generic drugs than they would have paid at community pharmacies.

Prosecutors in Ohio said the verdict represents the first time that a US jury has recognized that a company managing pharmacy benefits has a legal duty to act in the best interest of retirees and pensioners.

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