McKesson Settles Fraud Case

Drug wholesaler McKesson Corp. has agreed to pay $3 million to settle allegations that it defrauded the Pentagon by charging more for medicine than government contracts allowed, federal officials said Thursday.

The civil settlement resolves claims McKesson overcharged for pharmaceutical products from October 1997 to December 2001, the Justice Department said.

McKesson denied any wrongdoing. “We actually believed the government owed us money,” said company spokesman Larry Kurtz.

The San Francisco-based company decided to settle to avoid litigation costs, Kurtz said. “We believe this whole thing was unclear as to who owed what to whom.”

The government is taking more healthcare companies to court alleging actions such as setting artificially high prices to inflate profits. As of August, about 150 federal cases were under review, according to the Justice Department.

McKesson is the drug distributor for the Department of Veterans Affairs and has contracts with other federal agencies, including the Department of Defense. Money for the settlement was set aside, and the accord won’t affect company financial results, Kurtz said.

Shares of McKesson rose 41 cents Thursday to $54.65.