JNJ Johnson and Johnson

By Peter Loftus 

Federal prosecutors are investigating drugmakers' contracts with companies that manage prescription benefits in the U.S., the latest sign of government scrutiny of how drug companies and industry middlemen do business.

The U.S. Attorney's Office for the Southern District of New York has sent demands for information to at least three drug companies: Johnson & Johnson, Merck & Co. and Endo International PLC, according to recent company filings with the U.S. Securities and Exchange Commission.

The so-called civil investigative demands seek information about the companies' contracts with pharmacy-benefit managers, or PBMs, which administer drug benefits for employers and health insurers. The drug companies didn't name any specific PBMs in their disclosures.

J&J said in an SEC filing Tuesday it received a civil investigative demand in March, seeking information about contractual relationships between its Janssen Pharmaceuticals unit and PBMs since 2006, for certain Janssen products. J&J said the demand was issued in connection with an investigation under the False Claims Act, a federal law that prohibits people and companies from defrauding the federal government.

A J&J spokesman said the company is cooperating with the investigation.

Merck said in an SEC filing Monday it received a civil investigative demand for information about its "contracts with, services from and payments to pharmacy-benefit managers" since 2006, in connection with the products Maxalt and Levitra. Maxalt is a treatment for migraines and Levitra treats erectile dysfunction. The company said it is cooperating with the investigation. A Merck spokeswoman declined immediate comment.

Endo said in an SEC filing last week it received a demand for documents and information about contracts with PBMs for the migraine drug Frova. The company said it is cooperating with the investigation. An Endo spokeswoman said the company doesn't yet have additional details on the investigation.

A spokesman for the U.S. Attorney's Office in New York declined to comment. A civil investigative demand is a government tool to request information that is sometimes broader in scope than a subpoena for documents.

The disclosures of the civil investigative demands don't identify any PBM's by name.

Among the largest PBMs are Express Scripts Holding Co. and CVS Health Corp. Representatives for the companies declined immediate comment.

It is common for drug companies to agree to pay rebates or offer other forms of discounts to PBMs in exchange for PBMs agreeing to pay for their members' use of certain drugs.

Federal investigators in recent months have been stepping up scrutiny of these relationships. In November, Merck said the U.S. Attorney for the Eastern District of Pennsylvania sent it a request for information about its pricing and contracting with PBMs and Medicare drug-benefit plans for the asthma drug Dulera.

Last year, AstraZeneca PLC agreed to pay $7.9 million to resolve Justice Department allegations that it provided price concessions on drugs including Prilosec to Medco Health Solutions, a PBM, in exchange for Medco providing favorable coverage for AstraZeneca's heartburn drug Nexium, in violation of a federal anti-kickback statute. AstraZeneca denied the allegations. Express Scripts, which acquired Medco in 2012, didn't immediately respond to a request for comment.

Federal investigators also have probed drug company relationships with other health-care middlemen such as pharmacies. In November, Novartis agreed to pay $390 million to settle Justice Department allegations that it provided discounts and rebates to specialty pharmacies to induce them to recommend that doctors prescribe certain Novartis drugs. Specialty pharmacies dispense drugs that can be complicated to handle and are often expensive. As part of the settlement, Novartis said it "admits, acknowledges, and accepts responsibility" for certain facts about its relationships with specialty pharmacies, according to a court document.

Write to Peter Loftus at peter.loftus@wsj.com

(END) Dow Jones Newswires

May 10, 2016 13:39 ET (17:39 GMT)

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