Judge Patti Saris of the US District Court for the District of Massachusetts today issued an order in the massive national class action lawsuit, In re Pharmaceutical Industry Average Wholesale Price Litigation. In it, she found Astra Zeneca (NYSE:AZN) and Bristol-Myers Squibb (NYSE:BMY) liable for double damages for their illegal conduct in artificially inflating teh Average Wholesale Prices of a number of physician-administered drugs. She had previously held in June 2007 that these companies had violated Massachusetts law in doing so, but had not ruled on the amount of damages they would have to pay. Today’s order is here.

Two PAL members, Health Care for All of Massachusetts, and Pipefitters Local 537 Trust Funds, are plaintiffs in the case.

Below is the press release that PAL issued today on this important development:

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FOR IMMEDIATE RELEASE

November 2, 2007

BOSTON, MA – Judge Patti B. Saris of the U.S. District Court for the District of Massachusetts issued an order today in the massive class action lawsuit, In re Pharmaceutical Industry Average Wholesale Price Litigation, awarding double damages against Astra Zeneca (NYSE:AZN) and Bristol Myers Squibb (NYSE:BMY) for illegally inflating the “Average Wholesale Prices” (AWPs) of certain physician-administered drugs. Astra Zeneca (AZ) will have to pay $12,941,869 in damages, and Bristol Myers Squibb (BMS) will have to pay $695,594.

A trial against these two companies and several others was held over several months in late 2006 and early 2007. In June 2007, the Court issued its order resulting from that trial, finding that AZ, BMS and Warrick Pharmaceuticals (a subsidiary of Schering Plough) had violated the Massachusetts Consumer Protection Act (Chapter 93A) by grossly inflating the AWPs for a number of drugs. In that June order, however, the Court did not award final damages against the defendants, requesting additional information from the parties. The order issued today is the Court’s ruling on those damages. One of the key issues the Order addresses is whether the damages should be multiplied or not.

Under the Mass. Consumer Protection Act, a Court can order the doubling or even trebling of damages against defendants for “unfair and deceptive” conduct, if the conduct was “knowing and willful.” Judge Saris found that AZ’s and BMS’s conduct in inflating the AWPs of the drugs in question was knowing and willful, because they knew that Medicare patients and their insurers would have no choice but to pay 20% co-insurance on the “grossly inflated phony AWPs.” She awarded double damages against Astra Zeneca because it “sold its drug Zoladex based on its profitability to the doctor’s office…[t]he damage to the sick and old beneficiaries was inevitable.” She awarded double damages against BMS for certain years for the drugs Taxol, Cytoxan and Rubex. These double damages apply to a class of Massachusetts health plans that provide Medicare supplemental insurance. For a separate class of non-Medicare Massachusetts health plans, she awarded single damages.

“This is a major victory for consumers and health plans in Massachusetts,” said John McDonough, Executive Director of Health Care For All, a plaintiff in the case and a member of the Prescription Access Litigation (PAL) coalition. “Drug companies have been put on notice that illegally inflating drug prices at the expense of seriously ill seniors and the disabled will cost them dearly in Massachusetts.”

Blue Cross Blue Shield of Massachusetts was also a plaintiff in the case, as was PAL coalition member Pipefitters Local Union 537 Trust Funds.

The Judge’s order applies only to health plans in Massachusetts, as the trial addressed claims under Massachusetts state law. Claims against these defendants in the 49 other states must still be heard by the Court. The lawyers representing the plaintiffs estimate that, if one extrapolates the numbers in Massachusetts to the other 49 states, total nationwide damages against these two companies could exceed $200 million.

Both Bristol Myers Squibb and Astra Zeneca previously had agreed to settle some of the claims against them, claims that the price increases harmed a nationwide class of millions of individual Medicare beneficiaries. Astra Zeneca agreed in May 2007 to settle those claims for $24 million and Bristol Myers Squibb agreed in July 2007 to settle for $13 million. Another defendant, GlaxoSmithKline, settled all the claims aginst it in August 2006 for $70 million, and thus was not part of the trial that began in fall 2006.

Today’s order is just the latest development in this massive nationwide class action suit against dozens of drug companies. The next round of trials, addressing hundreds of additional drugs, is currently scheduled to begin in spring 2008.

“The Judge’s decision in this case exposes one of the most reprehensible drug industry schemes in recent memory,” said Alex Sugerman-Brozan, director of Prescription Access Litigation, “Overcharging people on Medicare with cancer and other serious illnesses and their health plans is as appalling as it gets, and this decision should give the other companies in this lawsuit some indication of what may lay ahead for them.”

Today’s order brings the total amount of settlements and judgment in the case so far to over $120 million. The order can be found here.

About Prescription Access Litigation
The Prescription Access Litigation (PAL) (www.prescriptionaccess.org) Project works to challenge illegal pharmaceutical industry tactics that increase the cost and improper usage of prescription drugs, using class action litigation and public education. PAL is a national coalition of more than 130 organizations, including consumers, seniors, heath care, labor, legal services, women’s health and human services groups in 36 states and the District of Columbia. PAL is a project of Community Catalyst, a national non-profit advocacy organization working to build the consumer and community leadership that is required to transform the American health system. PAL publishes the PAL Blog at www.prescriptionaccess.org/blog.

About Health Care For All
Health Care For All (www.hcfama.org) is building a movement of empowered people and organizations in Massachusetts with the goal of creating a health care system that is responsive to the needs of all people, particularly the most vulnerable. Health Care For All is dedicated to making quality care the right of all people, and supports a health care system that is universal, comprehensive, and equitable.

Bristol Myers Squibb (NYSE:BMY) is the latest defendant to reach a settlement with plaintiffs in the massive Average Wholesale Price litigation (In re Pharmaceutical Average Wholesale Price Litigation, before Judge Patti Saris of the U.S. District Court for the District of Massachusetts). A number of PAL coalition organizations are plaintiffs in this massive case, against dozens of pharmaceutical defendants. In a nutshell, the case alleges that the defendants fraudulently and artificially inflated the “Average Wholesale Prices” (AWPs) of hundreds of physician-administered drugs. These AWPs are listed in commercial pricing publications and were used by Medicare and insurers to determine how much to pay doctors for drugs administered in doctors’ offices.

A trial of Medicare patients’ claims against BMS was originally slated to begin this coming Monday, July 23. Last month, Judge Saris issued a 183-page decision in another phase of the case, in which she found that BMS and two other defendants (Astra Zeneca and Warrick, a subsidiary of Schering-Plough) caused the publication of false and inflated Average Wholesale Prices for seven drugs. The BMS drugs were Taxol, Vepesid, Cytoxan, Blenoxane and Rubex.

The decision last month found BMS and the other defendants liabile for damages caused to classes of Massachusetts insurance companies and non-Medicare consumers in Massachusetts. The trial that was slated to begin next week concerned damages caused to a nationwide class of Medicare patients. The settlement is not surprising in the wake of Judge Saris’ decision last month. The claims of the nationwide Medicare class are based on the same facts as those that Judge Saris found in her recent decision, and the causes of action (primarily state consumer protection acts) pretty closely mirror those in that decision as well (which were based on the Massachusetts Consumer Protection Act, Chapter 93A). Thus, if the trial had gone forward, it’s likely that the facts that were established in the previous decision would have already been found to be true (known in legal parlance as “collateral estoppel”) — the only issues thus would have been whether BMS violated those other state consumer protection acts and the federal RICO statute, and the extent of damages that caused.

No settlement has been filed with the Court yet, but on July 18 Bloomberg News reported on the fact that a settlement was reached:

Bristol Avoids Trial Over Taxol Price With Settlement (Update2)

By Cary O’Reilly

July 18 (Bloomberg) — Bristol-Myers Squibb Co. agreed to settle a class-action lawsuit over prices the company charged for its Taxol cancer drug and other medicines, just before a trial was set to begin in Boston.

The company, which admitted no wrongdoing, agreed to pay $13 million to settle all claims in the nationwide suit, Bristol spokeswoman Laura Hortas said. The case, which was set for trial July 23, was filed on behalf of consumers in dozens of states who made copayments for company drugs based on prices that had been artificially inflated, according to the complaint.

U.S. District Judge Patti Saris in Boston last month ordered Bristol, AstraZeneca Plc and Schering-Plough Corp. to pay damages for overcharging on drugs through so-called average wholesale pricing, or AWP. The trial that was to begin next week concerned only copayments for Bristol drugs. Taxol generated $1.6 billion in sales in 2000 before Bristol lost patent protection for it.

“We’re quite pleased with the settlement,” plaintiffs attorney Steve Berman of Hagens Berman Sobol Shapiro in Seattle said in an interview. “Any time you get over 100 cents on the dollar in recovery for consumers, that’s pretty darn good.”

The company also agreed to pay as much as $1 million for the cost of notifying affected consumers.

Consumers made insurance plan copayments under Medicare Part B based on average wholesale prices for Bristol drugs, including Taxol, that were far higher than what the company was charging doctors and hospitals, according to the complaint.

Out of Pocket

Chemotherapy and other medicines administered in physician offices were covered under Medicare Part B, with patients in many instances paying 20 percent of those costs out of pocket. That meant any increase in the average wholesale price for Taxol could result in higher fees for patients on chemotherapy.

Saris will hold a hearing Aug. 9 to consider the Bristol settlement, according to a docket entry on her court’s Web site.

“Bristol-Myers Squibb is pleased to have reached a settlement of the Class 1 claims in the average wholesale price litigation,” Hortas said.

In an earlier case, Saris found that Bristol-Myers inflated AWP for five medications, including Taxol. The AWP price for the cancer drug was found to be as much as 500 percent higher than what was charged to doctors.

AWP, which is self-reported by drugmakers, was once used by government health programs such as Medicare to set reimbursement rates. Medicare has moved away from the system, though some private insurance plans, including Blue Cross, still use it.

Medicare Switch

Medicare, the federal health plan for the elderly, switched in 2004 from AWP to a system of paying 106 percent of the average reported sale price of a drug.

Consumers who say they were harmed by AWP pricing for more than 300 drugs sued in 2001, alleging an industrywide scheme to defraud the U.S. health-care system. The suit was carved up by Saris based on different drug types to make the litigation more manageable.

GlaxoSmithKline Plc, Europe’s biggest drugmaker, agreed in August to pay about $70 million to settle claims by state attorneys general and consumers that the company used AWP to overcharge government health programs for its medicines.

Bristol shares fell 7 cents to $32.07 as of 12:45 p.m. in New York Stock Exchange composite trading, giving the company a market value of $63.3 billion.

The case is In Re: Pharmaceutical Industry Average Wholesale Price Litigation, MDL No. 1456, U.S. District Court, District of Massachusetts (Boston).

To contact the reporter on this story: Cary O’Reilly in Washington at caryoreilly@bloomberg.net

A major victory occurred today in the massive Average Wholesale Price lawsuit in the U.S. District Court for the District of Massachusetts. PAL’s press release on this is below. To learn more about this case, go here.

FOR IMMEDIATE RELEASE

June 21, 2007

Contact: Mark Snyder
617-275-2931, msnyder@communitycatalyst.org

Federal Court Rules Against Three Drug Companies in Average Wholesale Price Case
Judge finds Astra Zeneca, Bristol-Myers Squibb and Warrick acted “Unfairly and Deceptively”

BOSTON, MA – Today, Prescription Access Litigation (PAL) and Hagens Berman Sobol Shapiro LLP announced a landmark victory in a prescription drug lawsuit brought by members of PAL and others. Judge Patti Saris, of the U.S. District Court for the District of Massachusetts, found that AstraZeneca (NYSE: AZN), Warrick (a subsidiary of Schering-Plough (NYSE: SGP)) and Bristol-Myers Squibb (NYSE: BMY) violated the Massachusetts consumer protection act, Chapter 93A, by reporting false “Average Wholesale Prices” for a number of prescription drugs, including physician-administered drugs for cancer.

The “Average Wholesale Price,” or AWP, is a benchmark figure reported by drug manufacturers to commercial publications that publish compendia and electronic databases of prescription drug prices. Health plans, government health programs such as Medicaid and other “third party payors” use these AWP figures to determine how much to pay doctors and pharmacies for drugs which are given to their members and insureds.

The lawsuit is part of a much larger case, In re Pharmaceutical Industry Average Wholesale Price Litigation. Dozens of defendants, including the largest drug companies in the U.S., are alleged to have reported inflated and inaccurate AWPs for drugs covered by Medicare Part B, in order to increase sales of their drugs. Until 2003, Medicare reimbursed doctors for these drugs using a formula based on the AWP. However, the amount it cost doctors to purchase these drugs was much lower than the amount Medicare reimbursed them. Doctors profited from the difference, known as the “spread.” The defendants in this suit are alleged to have “marketed the spread” by artificially inflating the AWP so as to increase the amount the doctor would keep as profits by purchasing that company’s drug as opposed to a competitor’s.

Medicare Part B pays 80% of the cost of drugs that are administered in a doctor’s office as well as a small number of self-administered drugs, such as asthma drugs used with a nebulizer. The remaining 20% is paid by individual Medicare recipients or by supplemental insurance, known as “Medigap” plans. Today’s ruling benefits health plans and consumers in Massachusetts who paid part or all of that 20%, as well as health plans that paid for these drugs for patients not enrolled in Medicare.

“Today’s decision rights a great wrong that was done by these three companies against some of our society’s sickest and most vulnerable patients,” said Alex Sugerman-Brozan, director of Prescription Access Litigation. “What could be more outrageous than taking advantage of cancer patients in the name of profits?” One of PAL’s coalition members, Pipefitters Local 537 Trust Fund, is a plaintiff in the case.

The Court found that the three defendants caused the publication of false and inflated Average Wholesale Prices for seven drugs:
• Astra Zeneca: Zoladex
• Bristol Myers Squibb: Taxol, Vepesid, Cytoxan, Blenoxane and Rubex
• Warrick: albuterol sulfate

“Prescription drugs are one of the fastest growing cost drivers in health care,” said John McDonough, Executive Director of Health Care For All, a Massachusetts advocacy group which is a member of the PAL coalition and a plaintiff in another part of the AWP case, “This decision puts drug companies on notice that they can’t get away with burdening the health care system by illegally and artificially increasing those costs.”

Although government programs (including Medicare Part B and Medicaid) are abandoning AWP, virtually all private health plans and insurers still use it. Today’s Court decision and a settlement in another lawsuit will help push these third party payors towards other benchmarks. In October 2006, a separate case brought by two PAL coalition members against First Databank, the main publisher of AWPs, was settled. In that settlement, First Databank agreed to roll back the AWP spreads on hundreds of drugs, and to stop publishing AWP data within two years of the settlement becoming final.

“This Court decision is yet another nail in the coffin of Average Wholesale Price,” said Sugerman-Brozan. “The day is long overdue for our health care system to pay for drugs based on real and accurate data, rather than on fictitious figures made up by drug companies that are more concerned about profits than patients.”

This summer, trials begin in another phase of this massive AWP litigation, with a trial set to begin in July against Bristol Myers Squibb on behalf of a nationwide class of individual Medicare beneficiaries. Steve Berman, lead attorney in the case and managing partner of Hagens Berman Sobol Shapiro LLP, said “We are looking forward to continuing the prosecution of this case against the remaining defendants who perpetrated similar if not identical wrongs against patients and insurers nationwide. We view this ruling as a big win that should serve notice to all defendants that they will be called to account for their wrongdoing.”

To view a copy of today’s decision, go to
www.prescriptionaccess.org/docs/AWP-6-21-07-Order.pdf

About PAL
Prescription Access Litigation (PAL) (www.prescriptionaccess.org) is a nationwide coalition of over 130 state, local, and national senior, labor and consumer health advocacy groups in 35 states and the District of Columbia fighting to make prescription drugs affordable. The organizations in the PAL coalition have a combined membership of over 13 million people. PAL works to end illegal drug industry practices that increase the price of prescription drugs beyond the reach of the American consumer, using class action litigation and public education. Since 2001, PAL members have filed 28 sets of lawsuits targeting such practices. News about PAL’s cases and public education efforts is published regularly on the PAL Blog at www.prescriptionaccess.org/blog

About Hagens Berman Sobol Shapiro LLP
The law firm of Hagens Berman Sobol Shapiro LLP is based in Seattle with offices in Chicago, Cambridge, Los Angeles, Phoenix and San Francisco. Since the firm’s founding in 1993, it has developed a nationally recognized practice in class-action and complex litigation. Among recent successes, HBSS has negotiated a pending $300 million settlement as lead counsel in the DRAM memory antitrust litigation; a $340 million recovery on behalf of Enron employees which is awaiting distribution; a $150 million settlement involving charges of illegally inflated charges for the drug Lupron, and served as co-counsel on the Visa/Mastercard litigation which resulted in a $3 billion settlement, the largest anti-trust settlement to date. HBSS also served as counsel in a $850 million settlement in the Washington Public Power Supply litigation and represented Washington and 12 other states in lawsuits against the tobacco industry that resulted in the largest settlement in the history of litigation. For a complete listing of HBSS cases, visit www.hbsslaw.com.

FTC Commissioner Supports Bill Banning Reverse Payments
PAL and 20 other organizations recently sent letters to the members of the House Energy and Commerce Committee, supporting HR 1092, the “Protecting Consumer Access to Generic Drugs Act of 2007.” FDANews.com Drug Daily Bulletin reports today:

Lawmakers at a House subcommittee hearing debated whether a bill that would ban reverse payment agreements would discourage generic companies from introducing new drugs or allow more generic products at lower prices for consumers.

H.R. 1902, the “Protecting Consumer Access to Generic Drugs Act of 2007,” would prohibit reverse payment deals where brand pharmaceutical companies compensate generic companies to delay introducing a generic drug to the market. However, it would authorize the FTC to make exemptions allowing the payments if they would be good for consumer interests.

Under reverse payment agreements, brand name and generic companies can stop competing and share the savings consumers should get, Rep. Bobby Rush (D-Ill.) said during a House Subcommittee on Commerce, Trade and Consumer Protection hearing. Reverse payments are costing consumers and government programs “billions and billions of dollars,” he added.

The bill is a “fundamentally sound approach” to the problem of anticompetitive agreements between generic and brand drug firms, FTC Commissioner Jon Leibowitz said. The FTC currently reviews every settlement between companies under the Hatch-Waxman Act, so it is well prepared to make exemption judgments, he added.

Eleven former FTC commissioners have all supported enforcement efforts against reverse payments, according to Rush. However, critics of the bill said it would discourage generic companies by limiting the types of settlements companies can enter.

Also today, “Bristol Myers Squibb announced that it would plead guilty to two criminal charges for making false statements to a U.S. government agency about the company’s patent settlement for the blood thinner Plavix,” again according to FDANews.com Drug Daily Bulletin It is worth noting that the guilty plea apparently has nothing to do with the reverse payment agreement itself, or with the legality of such agreements. But rather, the plea only addresses the criminal charges of making false statements to a government agency concerning that settlement.