Medco, Merck Accused of Antitrust Practices

Medco Health Solutions Inc., a pharmacy-benefit manager, said Friday that two California pharmacies were suing the company and its former parent, Merck & Co., alleging anti-competitive practices including price fixing.

The suit, filed in San Francisco County Superior Court, accuses Medco of setting prices above competitive levels and giving preferential treatment to Merck drugs, according to a Medco filing with the Securities and Exchange Commission.

The suit is the latest in a series of antitrust lawsuits alleging Medco and Merck, the second-biggest U.S. drug maker, used illegal tactics that hurt competitors’ sales and pharmacists’ reimbursements. In September, U.S. Atty. Patrick Meehan filed suit in Philadelphia, saying Franklin Lakes, N.J.-based Medco received $430 million from Merck in 2001 to favor its more-expensive drugs.

“We vehemently deny the allegations,” said Soraya Balzac, a spokeswoman for Medco, which Merck spun off in August. The company is responding to the complaint, she said.

The California pharmacies’ suit seeks compensation for their lost profits. A Merck executive declined to comment.

Alameda Drug Co. and 1750 Medical Center Pharmacy, were joined in the suit by the Pharmacy Defense Fund, a nonprofit advocate organization for retail pharmacies, Balzac said. Pharmacies in Pennsylvania and Alabama filed similar suits against Medco and Merck last year.

Shares of Whitehouse Station, N.J.-based Merck fell 55 cents to $48.31, while Medco fell 5 cents to $31.45, both on the New York Stock Exchange.