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