07/08 00:49 Merck Inflated Revenue by $12.4 Bln, Wall Street Journal Says By Alan Purkiss
New York, July 8 (Bloomberg) -- Merck & Co., the second- biggest U.S. drugmaker, recorded $12.4 billion in revenue from its pharmacy-benefits subsidiary during the past three years that the unit never collected, the Wall Street Journal Europe reported, citing a company filing to the Securities and Exchange Commission.
The Medco unit has included as part of its revenue co- payments collected by pharmacies from patients, though it doesn't receive those funds; Merck disclosed the accounting policy in April, but Friday's SEC filing was the first disclosure of exactly how much revenue is involved, the newspaper said.
Merck says the policy has no effect on net income, because it subtracts the exact amount as an expense, the Journal reported.
Merck faces a lawsuit alleging that Medco, which is due to make a $1 billion initial share offer, used improper accounting methods to boost revenue. A federal suit filed in Newark by shareholder Arnold Deutschl claims that the policy on co-payments violates Generally Accepted Accounting Principles, or GAAP.
