GAO Urges Scrutiny of Drug Firm, Benefit Manager Deals : Health: Agency found Medco had favored Merck in promoting medicines but did not conclude any laws were broken.

A company whose job is to provide the most cost-effective medicines for 42 million Americans favored drugs by Merck & Co. just months before Merck bought the firm, the General Accounting Office said.

The GAO, the investigative arm of Congress, looked into Merck’s buyout of Medco, a pharmacy benefits manager. The GAO did not conclude that any laws had been broken. “However, the extent to which Medco gave preference to Merck products” should prompt close scrutiny of such deals by the Federal Trade Commission, the GAO said.

Rep. Ron Wyden (D-Ore.) asked the FTC to examine whether such mergers give companies such as Merck an unfair advantage, to consumers’ detriment.

Last month, Medco settled civil charges that it broke consumer fraud laws in the way it had promoted Merck drugs. It agreed with 17 states to reform the way it promotes drugs. The states had charged that Medco-employed pharmacists had lobbied doctors to switch their patients to Merck drugs without pointing out Medco’s link to Merck.

Pharmacy benefit managers are companies hired by employers or insurers to find the best drugs for given diseases and buy them in bulk at heavily discounted prices. They put products on preferred prescribing lists called formularies, and doctors then are urged to prescribe the drugs on those lists.

Some drug makers and consumer advocates have complained that manufacturer-owned benefit managers discriminate against products made by their owners’ competitors. The FTC has warned benefit managers that this practice could violate antitrust laws. The Food and Drug Administration is considering whether to make regulations itself.