Merck reported $12.4 billion in revenue it never collected

NEW YORK -- Merck & Co. recorded $12.4 billion in revenue from its pharmacy benefits unit over the past three years even though the subsidiary never collected the money. The news sent company stock falling Monday.

Merck, the world's third-largest drug maker, said it had followed generally accepted accounting practices and the practice didn't affect earnings since the revenue was offset in financial reports as an expense.

But its stock fell amid heightened investor suspicion about corporate accounting following debacles at Enron, WorldCom and elsewhere. On the New York Stock Exchange, Merck stock fell $1.05 a share to close at $47.81.

The revenue in question came from co-payments paid by consumers using prescription drug cards under insurance plans. The pharmacy keeps the co-payment, which covers only part of a drug's cost.

Merck counted patients' co-payments to druggists as revenue generated by its Medco unit, which handles prescriptions for 65 million Americans through retail pharmacies, a mail-order program and its Internet pharmacy.