NEW YORK (AP) ? More than $12 billion in revenue reported by Merck & Co. was never collected by the drug giant's pharmacy-benefits unit, the Wall Street Journal reported.

Merck counted patients' co-payments to pharmacies as revenue generated by its Medco unit, which manages pharmacy-benefit programs for businesses and health insurance companies, the newspaper reported Sunday on its Web site.

Medco, however, does not actually receive those co-payments, which totalled almost 10 per cent of its overall reported revenue in 1999, 2000 and 2001.

The company told the Wall Street Journal that its accounting practice meets generally accepted standards and that it also counts co-payment amounts as expenses, meaning the practice does not effect its net income.

The exact amount of reported but not collected revenue ? $12.4 billion ? was reported in a Friday filing by Merck with the Securities and Exchange Commission.

The accounting practice itself was reported in an April SEC filing and publicized two weeks ago by the Journal. Merck stock dropped five per cent, to a five-year low, after the article was published.

There is no indication that the SEC has taken issue with how Merck treats co-payment amounts, the newspaper reported.

The revenue in question is the co-payment paid by consumers with a prescription drug card to their retail pharmacy to cover their portion of the cost of a drug under an insurance plan. The pharmacy keeps the entire amount of the co-payment.

Merck, the world's third-largest drug maker, hurt by slumping profits and a slowdown in its drug pipeline, has been under pressure to spin off its Merck-Medco subsidiary.

With $29.1 billion in revenues last year, the unit generated over half of its parent's overall sales. But Medco's razor-thin profit margin, barely one per cent, hurt Merck's bottom line.

Medco is the nation's second-biggest pharmacy benefit manager, handling prescriptions for 65 million Americans through retail pharmacies, a mail-order program and its Internet pharmacy.

The Star

-- Anonymous, July 08, 2002

Answers

The pharmaceutical companies have had problems with
their manufacturing units since early 2000.

CO: Drug shortage hits hospitals

WA: Drug shortages raise alarm at hospitals

With all these billions of dollars of restated
earnings, why is there no investigation into why
there is this massive loss of earnings in the
largest corporations in the last two years?

-- Anonymous, July 09, 2002