Merck Shares Drop on Medco Report

Merck & Co. said its Medco unit acted properly when it booked revenue from patient co-payments to pharmacies that it never collected, but its shares fell on a report that questioned the practice.

Shares of Merck fell $2.22 to $49.98 on the NYSE, their lowest level since late 1997.

Merck declined to comment on how the report about its Merck-Medco unit might affect the company’s planned spinoff of about 20% of Medco through an initial public offering, which Wall Street expects next week.

Pharmacy benefits managers such as Medco ensure that only drugs on an insurance company’s list of approved medications are dispensed by pharmacies--a role meant to help keep drug expenses affordable.

CareMark Rx, one of Medco’s rivals, also recognizes co-payments as revenue and defended that arrangement, saying the practice was consistent with generally accepted accounting methods. But its stock was off 45 cents at $17.34 on the NYSE.