updated 4/26/2004 2:42:45 PM ET 2004-04-26T18:42:45

The nation’s largest pharmacy benefits manager agreed Monday to pay $29 million to settle allegations that it had doctors switch patients’ medications so it could receive large rebates.

Medco Health Solutions Inc. also will be required to make a number of new disclosures to prescribers and patients, including the company’s financial incentives for certain drug switches.

The lawsuit alleged that Medco violated unfair trade practices laws in 20 states.

“Consumers and their doctors should make the decision of switching from one medication to another based on the best interests of the patient, not because a (pharmacy benefits manager) has found a way to make money,” Pennsylvania Attorney General Jerry Pappert said in a statement.

The agreement does not include an admission or finding of inappropriate business conduct by the Franklin Lakes, N.J.-based company.

Medco also announced Monday that it would settle a federal lawsuit that claimed the company ignored safety rules at its mail-order drug centers and pressured doctors to switch patients to medications made by its former owner, Merck & Co. Terms of that deal were not released.

Medco, like other pharmacy benefits managers, contracts with health plans to process prescription drug payments to pharmacies. It handles prescription coverage for more than 62 million Americans.

The settlement with the states was spearheaded by authorities in Pennsylvania, Massachusetts and Maine, and includes Arizona, California, Connecticut, Delaware, Florida, Illinois, Iowa, Louisiana, Maryland, Nevada, New York, North Carolina, Oregon, Texas, Vermont, Virginia and Washington.

The agreement calls for Medco to pay about $20 million to states, $6.6 million for litigation fees and costs and $2.5 million to reimburse patients for medical tests needed after they were switched to other drugs.

Medco spokeswoman Jennifer Leone said Monday that the company wanted to put the lawsuit in the past.

“This is not admitting guilt. This is about making a good business decision,” Leone said.

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