Article: Jury awards $7.8 million in teachers fund fraud case

300 million dollars whittled to 7.8 million dollars in a few weeks - that's "chump change" for Medco! Will retirees win more with punitive damages? Let's hope so! Medco will appeal any and all on this case. Did STRS have a strong case against Medco? -- John Curry

December 19, 2005
Associated Press

CINCINNATI - A jury awarded $7.8 million Monday in a lawsuit charging the State Teachers Retirement System was defrauded by its pharmacy benefits manager.

Attorney General Jim Petro filed suit in 2003, alleging that Medco Health Solutions Inc. and parent Merck & Co. overcharged the fund.

"Merck and Medco abused their relationship with STRS and placed corporate interests ahead of their obligations to Ohio's retired teachers," Petro said in a statement. "With this verdict, we've brought them to account for that."

Franklin Lakes, N.J.-based Medco provided pharmacy benefit services for the teachers retirement system until 2001. The plan covered more than 100,000 retirees.

The Hamilton County Common Pleas jury found that Medco was liable for constructive fraud and awarded $6.9 million in damages. The jury also ruled that Medco breached its fiduciary duty to STRS Ohio in the amount of $915,000.

The jury said that Merck was jointly liable for the actions of Medco, its former subsidiary, but did not wrongfully interfere with the contract or business relationship with the state. Medco spokesman Jeff Simek said that under their 2003 spinoff agreement with Merck, Medco would assume any financial responsibility for such cases.

The jury deadlocked on the plaintiffs' request for punitive damages.

"We're very pleased, and we're going to look forward to going back to trial on the punitive damages," said Cincinnati attorney Stan Chesley, who represented the plaintiffs at trial.

Medco said it did not violate its contract with the state and would appeal the jury's decision. The company noted in a statement that the plaintiffs had sought more than $300 million, and that the jury rejected charges Medco breached the contract on mail-order dispensing fees.

"We believe the evidence supported complete vindication," Medco attorney David Machlowitz said in the statement. "Although the award was a fraction of the claim made by the plaintiffs, we believe there are multiple grounds for Medco to successfully reverse this decision on appeal."