Another black eye for Merck

Merck (MRK) is cleaning up another legal mess. The big drugmaker agreed Thursday to pay $649 million plus interest to settle lawsuits filed by federal and state authorities over misbilling allegations dating back to the 1990s. The suits had alleged that Merck, which continues to fight suits tied to its 2004 recall of painkiller Vioxx, overcharged the federal Medicaid program for drugs such as its Zocor cholesterol reducer while offering big discounts to private hospitals. Laws in states such as Nevada, where one of the suits was filed, specify that drugmakers must tell the government what prices they offer to private firms, so the government can take an appropriate rebate.

Merck continues to deny any liability or wrongdoing but agreed to enter into a corporate integrity agreement with the Office of Inspector General of the U.S. Department of Health and Human Services - a sign of how serious the allegations were. The news comes as Merck and Schering-Plough (SGP) continue to deal with questions over their handling of a study that showed the companies’ Vytorin anti-cholesterol drug worked no better than a much cheaper generic drug. Some skeptics wondered why it took so long for the results of the study to come out, though the companies have defended their actions - as Merck does in this case, and then some. “At Merck, we are dedicated to the highest standards of ethics and integrity,” the company said Thursday. “We have taken and will continue to take a leadership position in restoring trust in this industry and in ensuring that our interactions with healthcare professionals support the care of patients and further the public health.” Perhaps. As Fortune’s John Simons points out, the company has seen worse.