updated 7/30/2004 11:23:10 AM ET 2004-07-30T15:23:10

Schering-Plough Corp. agreed to pay $346 million in fines and damages to settle charges that it overcharged for drugs sold through Medicaid, the government’s health program for the poor, the company announced Friday.

The pharmaceutical company said it would also plead guilty to a federal criminal charge concerning a payment to a managed care customer.

Federal law requires drug makers to give their lowest prices to Medicaid, but a group of whistle-blowers accused the company of giving some private health care providers better deals on its drugs by offering them under-the-table “patient education” grants.

Federal prosecutors in Philadelphia began investigating the allegations in 1999 as part of a broad inquiry into pharmaceutical marketing practices.

The Kenilworth, N.J.-based company said that as part of the settlement it would pay a criminal fine of $52.5 million and civil damages of $293 million. Some of those damages, though, will be offset by credit the company will receive for $53.6 million in Medicaid rebates that it has previously paid.

“We are pleased that we are now putting this matter from the past behind us,” said Schering-Plough senior vice president Brent Saunders.

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