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Alex Sugerman-Brozan

McKesson drug price fraud case: is it the “largest class action in the U.S.?”

Cross-posted from Prescription Access Litigation Blog:

PAL members AFSCME District Council 37 Health and Security Plan and New England Carpenters Benefits Fund filed a class action lawsuit against First Databank Inc. and McKesson Corporation (NYSE: MCK) in 2005, alleging that the two companies conspired to add an arbitrary 5% to Average Wholesale Prices of hundreds of prescriptions that were published in First Databank’s drug pricing guides. We’ve covered the case extensively on the PAL blog (archived posts here) and much more information about the case, including court documents, can be found on our website here.

In October 2006, we announced that First Databank had agreed to settle the case against them. McKesson Corporation, one of the three largest pharmaceutical wholesalers in the country, did not agree to settle, and has aggressively fought to get rid of the case ever since. McKesson, a company that is virtually unknown to consumers, is the 18th largest company on the Fortune 500 list, with over $88 Billion in annual gross revenues, with over $750 Million in 2007 profits. They are larger than numerous other corporations that are household words, including Procter & Gamble, AT&T, Boeing, Sears, Pfizer, Target, Dell and Dow Chemical.

Last week, Judge Patti B. Saris of the U.S. District Court for the District of Massachusetts, ordered that the case against McKesson can proceed as a national class action. She certified two national classes: (copy of the Order is here)

Consumer Co-Pay Class “The Court certifies the following class for a period beginning August 1, 2001 and ending on May 15, 2005 for all purposes: Class 1, Consumer Purchasers: All individual persons who paid, or incurred a debt enforceable at the time of judgment in this case to pay, a percentage co-payment for the Marked Up Drugs during the Class Period based on AWP, pursuant to a plan, which in turn reimbursed the cost of brand-name pharmaceutical drugs based on AWP. The Marked Up Drugs include all of the drugs identified in Exhibit A to the Third Amended Complaint and consist of certain brand-name drugs only.” Third Party Payor Class: “The Court also certifies the following class for a period beginning August 1, 2001 and ending on December 31, 2003 for the purpose of damages, and for a period beginning August 1, 2001 and ending on May 15, 2005 for purposes of liability and equitable relief: Class 2, Third-Party Payors: All third-party payors (1) the pharmaceutical payments of which were based on AWP during the Class Period; (2) that made reimbursements for drugs based on an AWP that was marked up from 20 to 25% during the term of its contract with its PBM or with another entity involved in drug reimbursement; and (3) that used First DataBank or Medispan for determining the AWP of the marked up drugs. The Marked Up Drugs are all drugs identified in Exhibit A and consist of brand-name drugs only.”

Hagens Berman Sobol Shapiro, the law firm that is lead plaintiffs counsel in the case, in its press release said that the case “could become the largest class action in the United States, potentially totaling $7 billion in damages for consumers and third-party payers.

The press release also said “damages on behalf of consumers could total from $200 to $800 million and damages on behalf of third-party payers will exceed $5 billion.”

The Judge’s certification of the case as a national class action is enormously important. It allows the case to proceed on behalf of millions of consumers and tens of thousands of health plans, union benefit funds, self-insured employers and other “third party payors.”

The case, and the facts that have come to light as a result, shines further light on the complete lack of accuracy and accountability in how drugs are priced and paid for in the United States. The Average Wholesale Price system handsomely rewards and virtually invites fraud, and is in dire need of replacement. This lawsuit has the potential to compensate the millions of consumers and health plans who were overcharged as a result of McKesson’s and First Databank’s alleged fraud.

Last week, the plaintiffs and First Databank also filed an Amendment Settlement with the Court, attempting to address concerns that Judge Saris raised at the January 2008 “final approval” hearing for the First Databank settlement. Copies of the revised settlement documents are available here. The Judge’s order certifying the classes can be found here.

To receive udpates about the McKesson case, the First databank settlement and other prescription drug pricing and marketing lawsuits and settlements, fill out the form located here.

For information about the settlement with First Databank and also with Medispan, Inc., go here.

Alex Sugerman-Brozan: Author Bio | Other Posts
Posted at 1:14 PM, Mar 25, 2008 in Class Action | Corporate Abuse | Pharmaceuticals
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Comments

"[T]otaling $7 billion in damages for consumers and third-party payers."

Make that 1.8 - 2.6 billion for the lawyers, and 4.4 - 5.2 billion for rest...

Posted by: Third of the Pie | March 25, 2008 5:46 PM

Meanwhile, how much do corporations like this pay their in-house counsel, and how much do they pay their outside counsel hired to work in big lawsuits?

But that's besides the point.

Even if all the money went to the plaintiffs (in a world in which lawyers could dedicate countless 14-hour work days to intensely complicated legal work at no fee) tort deformers would still be wailing and gnashing their teeth.

The bottom line is they don't think corporations should have to pay for their negligence, and they don't think lawyers who fight corporate abuse should make a good living for doing their job well and helping people.

Posted by: Kia | March 26, 2008 4:19 PM

"Meanwhile, how much do corporations like this pay their in-house counsel, and how much do they pay their outside counsel hired to work in big lawsuits?"

If corporations ever paid in-house and outside counsel $2 billion, I could've retired long ago.

The real problem with this suit is that it is entirely factually and legally bogus. Each of the class members separately negotiate prices, and not a single one has suffered a penny in damages. Certification is inappropriate under Rule 23, as the individualized nature of the negotiations predominates.

Posted by: Ted | March 28, 2008 10:00 PM

Your full of CRAP Ted. Law firms do make several hundred dollars per hour over manipulated invoices, overcharging, double billing, and phantom charges.

You obviously worked FOR a lawfirm and was simply a slave to the smart lawyers who used your second rate college degree to their advantage. Had you any Ivy League degree you would understand this. Also, what makes you think a firm would pay "inside" counsel so much money to begin with? Are you arguing with yourself? Are you really an attorney? I say this because you quoted the previous post which presented a hypothetical question....and you then made it into a fact? That's second grade mentality there Ted.

I will close with this... McKesson is a soon-to-fall giant that takes advantage of people when they need help the most. This company is EVIL for doing this and has a long history of over-charging, manipulating prices and sucking the last dime from those that have no choice but to order price inflated medications to stay alive.

Our law firm will work hard to set the record straight. Under no circumstances will McKesson be allowed to use the weak, take advantage of the ailing, or profit from trauma. Our firm is donating all legal cost and has never charged one PENNY in this case.

Good luck on that retirement Ted,

Peter

Posted by: Ted's wrong | December 13, 2008 3:01 PM

"Damages on behalf of consumers could total from $200 to $800 million and damages on behalf of third-party payers will exceed $5 billion".Its very unfortunate for McKesson Corporation

Posted by: Ryan For McKesson Corporation Stock Market | March 21, 2009 3:11 AM

How do I join this class action lawsuit. I have used ambien allegra, claritin, flagyl, prevacid, prozac, prilosec, valuim and zantac all with presecrption and over the counter.

Posted by: Sue McCool | April 25, 2009 12:55 AM

I have used ambien, celebrex, flagyl, lipitor,prevacid, prilosec and valium. How do I become a part of this class action suit?

Posted by: Linda McElroy | April 25, 2009 2:59 AM

I have used ambien, celebrex, flagyl, lipitor,prevacid, prilosec and valium. How do I become a part of this class action suit?

Posted by: Linda McElroy | April 25, 2009 3:00 AM

How do I join class action, I have used lipitor, prilosec and celebrex. I still take celebrex.

Posted by: Shelby J Shirley | May 28, 2009 9:42 AM

how do I join the class action suit, I have used Celebrex for over 10 years. I still take celebrex daily

Posted by: Donald Montreuil | May 29, 2009 11:04 PM

How do I join this suit?

Posted by: Diana Williams | June 8, 2009 5:34 PM

I took Celebrex for well over 10 years. Alfred E Niles

Posted by: Alfred Niles | June 14, 2009 10:44 AM

I took Celebrex for well over 10 years. Alfred E Niles

Posted by: Alfred Niles | June 14, 2009 10:45 AM

I worked at this piece of crap company around 1990 at their distribution warehouse in Arlington, TX. It was a crazy place to work with forklift drivers running wild all over the place and threatening to run over you. The place was disorganized and very poorly managed. It was a dangerous place for an employee to work. Plus they worked you like a dog there. I hate McKesson.

Posted by: Craig | August 24, 2009 4:40 AM

Please advise me of any/or all updates in this case.

Posted by: ELMORE MAYFIELD | January 8, 2010 12:31 PM

I work for Mckesson at a Med-Surg DC in Ontario, California. I recently tried to organize a Union in this facility but when management found out they quickly ran an anti-union campaign filled with lies, distortions,and fear mongering. During one capitive audience meeting our manager tried to tell us about union corruption,when I asked him why our former CEO is in prison and I did not even get a chance to bring up this settlement because I was berated by my manager.They did a really good job of scarring the employees especially those who spoke Spanish and single mothers.Then all of a sudden the company announced that we would be geeting raises and or bonuses. We are still underpaid and many of their workplace policies are unfair. This company is a fortune 18 company that pulls in huge profits, much of which comes from public accounts, I feel that they should be held aacountable in providing all of their employees with fair wages and workplace conditions.

Posted by: Z | February 25, 2010 12:33 AM