Archive for the ‘First Databank’ Category
Tuesday, June 23rd, 2009
Today’s New York Times reports that PHARMA has finally staked out their agenda in health care reform – avoiding cost controls, and keeping generics off the market.
An undisclosed deal announced this past Sunday between the drug industry, Sen. Baucus, and the Obama administration would help pay as much as half the cost of brand name drugs for seniors in the costly ‘donut hole’ under Medicare. (Currently, a Prescription Drug Plan regulated under Medicare Part D pays three fourths of the first $2,700 in yearly prescription costs, but then stops at the ‘donut hole.’ This forces the consumer to pay all of the next $3,454 in costs out of pocket. Medicare Part D coverage starts back up when the drug costs exceed $6,100.)
Due in part to the continually rising costs of prescription drugs, a fourth of Medicare beneficiaries hit their donut hole. One out of seven of the seniors who hit the donut hole then stop taking their medications due to cost.
A White House spokesperson notes that the deal would save these elderly consumers $30 billion over the next 10 years, but that an additional $50 billion would go to the federal government over the next decade, possibly in the form of rebates to Medicaid or other federal programs purchasing drugs.
While proposals to control or reduce drug costs are needed, our experience with drug pricing fraud by the drug industry teaches us that reliable and transparent price benchmarks are needed to keep this proposal from being a sham. For instance, a nationwide class action lawsuit by PAL members revealed that drug wholesaler McKesson Corp. manipulated reported prices that were used as reimbursement benchmarks, which cost Medicaid, private insurers, and consumers over $7 billion from 2001 to 2005. Another PAL class action lawsuit revealed that over 13 of the largest drug manufacturers engaged in a scheme between 1991 and 2004 to inflate their reported reimbursement prices on doctor-administered drugs, costing Medicare part B, insurers, and consumers billions of dollars.
Finally, a government report from 2006 showed that even when the federal government negotiates contracts with drug makers that guarantee federally funded community health centers the best possible price, the drug industry failed to comply with the contracts, costing hundreds of millions of dollars each month, and possibly billions of dollars a year. In this case, lax monitoring and enforcement by HHS left community health centers and other front-line government programs with little recourse.
These lawsuits and other lessons illustrate the need for full transparency, to allow consumers advocates to monitor progress, and ensure that Medicare consumers truly benefit from this proposal.
In addition to heading off cost controls, the other prong of the drug industry’s agenda is to shoulder aside their generic competitors. As pointed out in today’s Wall Street Journal, this ‘discount program’ may actually discourage seniors on Medicare from switching to less expensive generic drugs.
PHARMA has also come out against legislation that would prevent brand name drug companies from paying their generic rivals to delay bringing new generics to the market. These “pay-for-delay” settlements have become common since 2005, and have cost consumers and insurers an estimated $12 billion a year in lost savings.
For instance, the current class action lawsuit by PAL member AFSCME District Council 37 has challenged multiple settlements between Cephalon Corp. and generic manufacturers Teva, Barr, Mylan, and Ranbaxy. These settlements, totaling up to $136 million dollars, have stopped all four of these generic companies from bringing a generic version of the drug Provigil to the market.
The House version of the bill to prevent “pay-for-delay” settlements, HR 1706, passed an important hurdle on June 3rd, when it was approved by the House Subcommittee on Commerce, Trade, and Consumer Protection, and sent to the full Committee on Energy and Commerce. The NY Times reports that the Senate version of the bill, S. 369, is poised for a vote this week.
The Times article noted that President Obama’s budget criticized these settlements as “anticompetitive agreements” that keep generic drugs off the market. The FTC, which continues to challenge the anti-competitive nature of these settlements in court, sees consumers being harmed. FTC chairman Jon Leibowitz said that allowing these settlements to continue would cost consumers tens of billions of dollars in the next decade. According to the Times, Mr. Leibowitz cautioned that
“Drug companies are lobbying furiously against the legislation because they want to preserve their monopoly profits at the expense of consumers.”
The Times article also made clear that Pharma has launched their own dis-information campaign on the bills. Pharma made the outrageous claims that these anti-competitive agreements benefitted consumers because they “avoided litigation and allowed generic drugs to enter the market before drug patents expired.”
However, in case after case (K-Dur, Tamoxifen, Cipro) these settlements have prevented generic versions of brand name drugs from becoming available to consumers. How?
These settlements, often for many millions of dollars, allow brand name companies to ‘buy-off’ their generic competitors with multi-million dollar payments that are far in excess of the profit margin on a new generic drug. This lets the brand name drug continue its exclusive sales, guaranteeing them hundreds of millions, if not billions of dollars free from competition.
These “pay-for-delay” settlements are likely to arise in current litigation on the validity of patents for the drugs OxyContin, Protonix. and Wellbutrin.
You can help. Please contact your Congressperson or Senator, and urge them to support HR. 1706/S. 369. If you are part of an organization, please contact us to sign on to a letter of support of these bills.
Wednesday, March 18th, 2009
PAL’s most important lawsuit and settlement to date wins final approval!
Yesterday, the Massachusetts federal District Court approved class action settlements with publishers First Databank and MediSpan that will require the roll back the illegally inflated prices of over 400 drugs!
PAL coalition members AFSCME District Council 37 Health and Security Plan in New York, and New England Carpenters Health Benefit Fund here in Boston brought the lawsuit against these two publishers, and the pharmaceutical wholesaler McKesson, for their role in unilaterally raising the prices of over 400 drugs through their alleged manipulation of the published “average wholesale price” or AWP. Though the system of pharmaceutical pricing and reimbursement is complex, the AWP is a benchmark that is used by insurers and government programs to reimburse pharmacies. It also effects the cost to cash-paying customers. It is alleged that defendants First Databank, Medispan, and McKesson raised the AWP, while keeping the actual cost (called a ‘wholesale acquisition cost’) the same. This done to give the large chain and other pharmacies, many of which are McKesson’s customers, an increased return on each of these drugs.
It has been estimated that this 5% increase in the cost of hundreds of drugs by the defendants may have cost consumers, insurers, and government programs over $2 billion in additional drug expenses.
It is estimated that the “rollback” of the price of these 400 drugs could yield between $1.5 Billion or more in future savings on drug costs. Perhaps of even greater importance, this lawsuit, along with other litigation (AWP, Remicade, Lupron) by PAL members, has exposed the weaknesses of the pharmaceutical pricing system that have allowed drug makers and wholesalers to manipulate or “game” the benchmark prices that government programs and insurers use for reimbursement.
The Judge in the case did allow a six month delay before the rollback of the drug prices, ” to alleviate the impact on independent and rural pharmacies.” This addressed the concern raised that small ‘mom and pop’ pharmacies may be forced to bear the full cost of the price rollback if they were unable to renegotiate their supply contracts for drugs with manufacturers and wholesalers.
The settlement also provides $2.7 million to be distributed along with the $350 Million in the preliminary McKesson settlement.
Thanks to PAL members New England Carpenters Health Benefit Fund, and AFSCME District Council 37 Health and Security Plan in New York for their work in bringing this important lawsuit.
Follow these links to see a copy of the Judge’s decision, the First Databank settlement, the Medispan settlement, or the pending McKesson settlement.
Wednesday, January 7th, 2009
As we reported last month in “Unions in PAL Coalition win $350 Million settlement in McKesson class action,” PAL coalition members AFSCME District Council 37 Health and Security Plan and New England Carpenters Benefits Fund were among the plaintiffs who helped achieve the historic settlement with McKesson.
The good folks at AFSCME DC 37 have their own newspaper, Public Employee Press, which goes to several hundred thousand DC 37 members and others in New York City. In the December 2008 issue, PEP, as it’s known, ran an article on the McKesson settlement. DC 37′s cartoonist has a knack for boiling down hundreds of pages into a single image.
Here are the two cartoons that accompanied the article about the McKesson settlement.
The first summarizes the case against McKesson, showing McKesson as a giant pill holding up consumers, with a “gun” labelled Rx. Note: While the bag of money says “$350 million,” the case alleged that the monetary damages of consumers and health plans were much higher. $350 million represents what McKesson is willing to pay to settle.
The second shows the DC 37 “cop on the beat” taking the McKesson pill into custody.
Here’s the full text of the article that ran in PEP about the case:
The McKesson Corp. has agreed to pay $350 million to settle a lawsuit brought by DC 37 and others who charged the drug wholesaler with illegally inflating the price of members’ medications.
In November, McKesson agreed to settle the case, which accused the firm of fixing prices in 2001 and 2002. The proceeds — including millions of dollars in damages for the DC 37 Health and Security Plan — will go to health plans and consumers.
In the 2006 suit, the DC 37 plan and a group of plaintiffs charged that McKesson conspired to fraudulently inflate the prices of more than 400 prescription drugs by manipulating price information published by First DataBank. The suit was filed under the Racketeer Influenced and Corrupt Organizations Act (RICO) and the settlement is one of the largest of its type.
“DC 37 is fighting a huge battle to provide quality prescription drug coverage for our members,” said DC 37 Executive Director Lillian Roberts. “It doesn’t help when those in the industry make it more difficult by rigging the system.”
First DataBank settled quickly, but McKesson, whose annual revenues top $500 billion, refused to settle until now.
McKesson was charged with creating the price-fixing scheme to benefit key retail clients who might otherwise have purchased wholesale prescriptions from its competitors. The lawsuits charged that the McKesson/First DataBank scheme raised the markup on hundreds of brand-name drugs from 20 percent to 25 percent.
DC 37 and three other union members of Prescription Access Litigation, a nationwide coalition of more than 120 senior, labor and consumer health advocacy groups that is fighting to make prescription drugs more affordable, participated in the lawsuit.
DC 37 Health and Security Plan Administrator Cynthia Chin-Marshall said the plan expects compensation in the settlement “for the millions of dollars in inflated prices we’ve been forced to pay.”
“Hopefully we have taught the drug industry a lesson and they will refrain from fixing prices in the future,” said Audrey A. Browne, the plan’s director of regulatory compliance.
Tuesday, December 23rd, 2008
A landmark settlement was recently announced in a class action lawsuit against the McKesson corporation (NYSE: MCK). We’ve reported frequently on this case in the past, because two of our coalition members are among the lead plaintiffs in the case, the New England Carpenters Benefits Fund and AFSCME District Council 37 Health & Security Plan.
These two union health and welfare funds first filed a class action lawsuit, with other union funds and individual consumers, back in June 2005 and February 2006, alleging that First Databank and McKesson had carried out an illegal scheme from 2002 to 2005 to raise the price of prescription drugs.
The lawsuits claimed that in 2002, McKesson and First Databank began arbitrarily raising the “WAC-to-AWP spread” to 25% for over 400 brand-name drugs. Those drugs previously had only 20% WAC-to-AWP spread. To learn more about the allegations, and what the heck WAC & AWP are, read our page about the case here.
The case against First Databank settled back on October 6, 2006, an event which was covered on the front page of the Wall Street Journal. That settlement has been amended several times, and is still awaiting approval by the Judge in the case.
However, for the past two years, the case against McKesson has been proceeding. Until last month, McKesson publicly expressed an unwillingness to settle the case and seemed ready to go to trial. In fact, the trial was scheduled to begin on December 1. But on November 21, the plaintiffs’ counsel in the case and McKesson each issued statements announcing the settlement.
McKesson agreed to pay $350 Million to settle the case, and took an additional charge of $143 million for “outstanding and expected future AWP-related claims by public entities.” (Earlier this year, the state of Connecticut and the city of San Francisco each filed lawsuits against McKesson. It’s likely that other cities and states would have followed suit, no pun intended.)
There are two notable things about the settlement:
1. The Size: As far as we are aware, this is the largest settlement to date of a private class action lawsuit concerning pharmaceutical pricing. The next largest is probably the $150 million settlement of In re Lupron® Marketing and Sales Practices Litigation. In the case of In re Pharmaceutical Industry Average Wholesale Price Litigation, there have four settlements, totalling $232 million, but those settlements have involved more than a dozen defendants.
2. The Role of Unions: Four out of the five organizations that were plaintiffs in the case are Health & Welfare benefit funds affiliated with labor unions. Unions and their health & welfare funds have been very active in drug price and marketing lawsuits since the beginning. This is not surprising, given that union benefit funds feel the effects of drug pricing so directly. Unlike for-profit commercial insurers, union benefit funds can’t just “pass on” the increased cost of drugs to their members through increased premiums. As entities created “by, for and of” the individual members of their unions, they are answerable to those members. They are funded by the union dues of their members, and they are run not by board of directors populated by outsiders, but by boards of trustees composed of union members and staff and employer representatives.
In addition, unions generally are concerned about the rising costs of health care and are often very involved in efforts to increase access to health care, reform the health care system, and rein in costs. So being involved in such cases is a natural extension of the labor movement’s commitment to increasing and improving health care. (The U.S.’s employer-based health insurance system in fact has its roots in union benefits in the 40s and 50s).
A class action lawsuit, at its core, shares certain similarities with the role of labor unions generally. In both, the power of a single individual (either a consumer or an employee, respectively) to protect their rights against a much larger, wealthier entity (a pharmaceutical defendant, or an employer) is severely limited. Only by combining their numbers (in a class action or a union, respectively), can a large but dispersed group of otherwise-lone individuals protect their rights and challenge illegal behavior.
The Court held a hearing on the settlement on December 11, 2008 to consider whether the settlement should receive “”preliminary approval.” This would allow notices to be published and sent to class members, letting them know that a settlement has been reached and may be approved by the Court. This triggers a period during which members of the class can file a claim form, and/or object to the terms of the settlement.
Steve Berman, lead plaintiffs counsel in the case, gave a number of reasons in his presentation to the Court why the settlement is fair, reasonable and adequate. He pointed to the fact that the settlement is the 3rd largest settlement ever of a RICO (Racketeer Influenced and Corrupt Organizations) Act case and possibly the largest drug fraud settlement ever. He said that the $493 million that McKesson has set aside for the settlement (and future settlements with public entities) represents 45% of McKesson’s total cash reserves. Speedy settlement, he argued, is in the interests of the class, particularly cash-paying consumers, given the state of the economy.
There are a number of innovative mechanisms proposed to ensure that settlement proceeds actually reach consumers in the classes. Large chain pharmacies would receive subpoenas to produce information about uninsured consumers who purchased the drugs at issue in the lawsuit. This information would be used to calculate payments for and issue checks directly to those consumers, without them needing to fill out a form and provide any documentation of their purchases. A group of large commercial health plans that are active in the case have agreed to collect data to calculate payments for and issue checks to consumers with insurance who paid for drugs at issue in the case and who would be eligible for such payments (this includes any consumers who had a percentage co-payment, rather than a fixed copayment, e.g. someone who paid 20% of the cost of a drug, and had 80% paid by their insurance, would be eligible for a payment from the settlement).
The settlement is very early in the stages it needs to go through before it is finally approved. But the fact that a settlement was reached is a very good development for consumers and health plans, and hopefully will serve to put other entities in the pharmaceutical marketplace on notice that fraud such as that alleged in this will not go unchallenged.
To learn more about the case against both First Databank, Medispan and McKesson see our page on the cases.
Tuesday, November 4th, 2008
Drug Benefit News brings us this fascinating story: Caterpillar/Wal-Mart Rx Drug Pilot Scraps Use of Average Wholesale Price, Uses Drug Cost-Plus Pricing.
Readers of this blog know that we are prone to getting on a soapbox about the flawed “Average Wholesale Price” (AWP) system that health plans and many government programs (like Medicaid) use to decide how much to pay pharmacies for prescription drugs. In fact, a number of members of our coalition have brought class action lawsuits against drug companies, drug pricing publishers and major drug wholesalers for allegedly inflating the Average Wholesale Prices of prescription drugs.
In a nutshell, pharmacies generally are very protective of the details of how much they pay to drug companies and wholesalers for the drugs that they then sell to consumers and health plans. They argue that revealing those prices would put them at a competitive disadvantage. So, health plans and governments are forced to decide how much to pay for drugs without knowing what the pharmacy paid. The Average Wholesale Price was intended to approximate what pharmacies in general were paying for a drug. The health plan would then agree in a contract with a pharmacy that they’d pay them an amount based on the AWP of each drug — say, AWP minus 5%. The idea was that a health plan would pay a pharmacy an amount that would be a modest amount higher than than what the pharmacy paid – the “actual acquisition cost.”
But AWPs no longer have any basis in any reality — the joke is that AWP stands for “Ain’t What’s Paid.” In the lawsuits mentioned above, there are examples cited where the AWP was many times, even tens or hundreds of times, higher than what pharmacies were actually paying. This meant that health plans were overpaying pharmacies — often massively – for prescription drugs.
First Databank and Medispan, two of the defendants in a class action lawsuit on this issue, have voluntarily agreed to stop publishing AWPs within approximately the next two years. Since these two companies are pretty much the only ones who publish AWPs anymore, this information is going to cease to be available pretty soon. That means that health plans, pharmacies and government programs are going to have to figure out an alternative. And that’s a major question still up in the air — what are they going to use instead of AWP?
Well, it looks as though WalMart (NYSE:WMT) and Caterpillar (NYSE:CAT) are already thinking about that, and have come up with an alternative — at least for those two companies. As Drug Benefit News explains:
A new pharmacy benefit pilot program involving Caterpillar Inc. and Wal-Mart Stores, Inc. cuts “significant waste” out of the pharmaceutical supply chain and scraps the long-maligned average wholesale price (AWP) discount methodology in favor of an Rx cost-plus model, say those involved in the program…
When Caterpillar approached Wal-Mart, the first thing the parties did was address the question of AWP, which Bisping describes as a “flawed methodology.” Typically, PBMs negotiate discounts off AWP, which can be wildly inflated and bear little resemblance to the true cost of the drug.
To address this concern, Caterpillar developed a new pricing methodology based on Wal-Mart’s actual invoice prices on drugs, Bisping says, adding that AWP doesn’t appear at all in the contract. “For all of the drugs that we purchase now from Wal-Mart, the core basis is on the real invoice price, of course, plus some money for their overhead and any margin they have to make,” he explains.
The article doesn’t go into very much detail about what this “new pricing methodology” actually means. We’re willing to bet that there are heavy-duty confidentiality provisions in the contract to prohibit Caterpillar from revealing the “real invoice prices” that Wal-Mart pays for drugs.
What’s most intriguing about this new model, as scant as the details are, is that it’s based on actual prices, instead of inherently unreliable and unverifiable “benchmark” prices. Basing drug reimbursements on actual costs is something we’ve supported for a long time, including in an article that ran several years ago in the BNA Pharmaceutical Law & Industry Report.
Another interesting aspect of this agreement is that it basically cuts out the traditional middleman between an employer (or health plan) and a pharmacy: the Pharmacy Benefit Manager (PBM). The PBM industry grew massively in the 90s to save employers and health plans from the hassle of having to engage in such negotiations. Now, Caterpillar is quite a large company, so don’t expect to see small- or even medium-size companies or health plans negotiating directly with pharmacies anytime soon. And Caterpillar’s PBM doesn’t seem that worried:
For their part, RESTAT [Caterpillar's PBM] executives say they are more than happy to assist Caterpillar with the program. The Wal-Mart agreement doesn’t do anything to change RESTAT’s basic relationship with Caterpillar, except for some negotiating relationships on acquisition costs at the pharmacy level, says David Kwasny, vice president of sales and marketing.
“We’re very flexible,” he tells DBN, adding that RESTAT is a highly transparent PBM that doesn’t make any spread on pharmacy utilization. “It’s not a conflict for us.”
Is this a sign of things to come? Can we expect to see other large employers and insurers moving away from AWP? With the coming demise of AWP, it’s inevitable. Let’s hope that other employers and health plans follow suit in the near future, rather than waiting until AWP is on its way out the door.
Monday, March 24th, 2008
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.
Monday, September 24th, 2007
Several PAL members are plaintiffs in class action lawsuits concerning alleged schemes by publishers of drug price data and a prescription drug wholesaler to inflate the Average Wholesales Prices of prescription drugs. Notices have been issued concerning settlements in these cases, New England Carpenters Health Benefits Fund, et al. v. First DataBank, Inc., et al. (U.S. District Court, Massachusetts, Case No. 1:05-CV-11148-PBS) and District Council 37 Health & Security Plan v. Medi-Span (U.S. District Court, Massachusetts, Case No. 07-cv-10988-PBS).
The settlements do not provide cash payments by First Databank or Medi-Span. The settlements call for First Databank and McKesson to roll back increases in the published Average Wholesale Prices of hundreds of drugs, and to cease publication of Average Wholesale Price data within 2 years of the settlement becoming final. These changes are expected to have a significant impact on drug prices which will benefit the members of the class.
The classes in the settlements includes consumers who paid for all or part of the cost of certain prescription drugs based on data published by FDB or Medi-Span. You must have made these purchases based on First Databank published prices between January 1, 2000 and the date of Final Court Approval of the FDB Settlement and/or purchases based on Medi-Span published prices between December 19, 2001 and the date of Final Court Approval of the Medi-Span Settlement. The classes also include third party payors. Pharmacy Benefit Managers and consumers who paid “flat” (i.e. fixed) copayments are excluded.
Deadlines related to these settlements are:
- To exclude yourself from the class, you must mail a signed letter, postmarked no later than December 21, 2007, asking to be excluded to: FDB/Medi-Span Settlement Administrator, c/o Complete Claim Solutions, LLC, P.O. Box 24730, West Palm Beach, FL 33416. Include your name, the name of the person or entity seeking exclusion, an address and telephone number.
- To object to the settlements, you must file a written statement with the Clerk of the Court, John Joseph Moakley U.S. Courthouse, 1 Courthouse Way, Suite 2300, Boston, Massachusetts 02210, postmarked no later than December 21, 2007.
- The Court will hold a fairness hearing on January 22, 2008 at 2 PM at the John Joseph Moakley U.S. Courthouse, 1 Courthouse Way, Boston, Massachusetts 02210, to:
- determine whether the Settlements are fair, reasonable and adequate and in the best interests of the Class, whether it should be approved by the Court, and whether judgment should be entered;
- consider the application of Class Counsel for an award of attorneys’ fees and expenses; and
- consider any other issues the Court thinks necessary.
This is just a paraphrasing of the notice. The official note, with forms, instructions and copies of Court documents, can be found at fdbmedispansettlement.com.
McKesson Corporation, the other defendant in the New England Carpenters case, has not agreed to settle, and the case against them is proceeding.
More information about these lawsuits can also be found here.
Monday, September 24th, 2007
In June 2005 and February 2006, members of Prescription Access Litigation’s coalition filed class action lawsuits against First Databank, Inc. and McKesson Corp, alleging that the companies conspired to raise drug prices by inflating the “Average Wholesale Price” (AWP) of hundreds of drugs. AWP is used to set the retail price of prescription drugs. The case seeks to get reimbursement for consumers and health plans, and to end this type of scheme.
You may be eligible to join this lawsuit if you:
- Had no insurance at any time between 2001 and 2004, and
- Paid for brand-name prescription drugs (not generics) yourself
OR if you paid for brand-name prescription drugs yourself that were not covered by insurance.
To find out if you qualify, please email pal(at)communitycatalyst.org (remove the “(at)” and replace with a @ when you write your email) or call 617-275-2931 or 866-208-9800 ext. 2931 by October 4th. Or complete this form and mention that you’re inquiring about the First Databank/McKesson case.
To receive updates about PAL’s cases and other projects, sign up for our occasional email alerts. To be contacted about class action lawsuits and settlements that you may eligible to participate in, please complete this form. All information will kept confidential.
Wednesday, September 5th, 2007
On August 27, 2007, Judge Patti B. Saris of the U.S. District Court for the District of Massachusetts issued an order allowed the case of New England Carpenters Health Benefits Funds et. al. v. First Databank, Inc., and McKesson (NYSE:MCK) to proceed as a class action. The lawsuit was brought by PAL members New England Carpenters Health Benefits Funds and AFSCME District Council 37 Health and Security Plan in June 2005 and February 2006.
The case alleged that First Databank, the preeminent publisher of whole prescription drug pricing information, and McKesson, one of the three largest prescription drug wholesalers, conspired to increase the “Average Wholesale Prices” published by First Databank for hundreds of brand-name prescription drugs. The “Average Wholesale Price,” or AWP, is a benchmark figure used by health plans and Pharmacy Benefit Managers to determine how much to pay pharmacies for prescription drugs that are dispensed to patients with insurance. For instance, a health plan may have a contract to pay a pharmacy AWP minus 15% for drugs given to its members.
Manufacturers report either the AWPs for their drugs to First Databank, or another figure, Wholesale Acquisition Cost (WAC), which is the price that manufacturers typically sell their drugs to wholesalers. First Databank would then apply a “markup” of 20% or 25% to the WAC to calculate the AWP. The lawsuit alleged that:
“Beginning in late 2001, First DataBank and McKesson reached a secret agreement on how the WAC to AWP markup would be established for hundreds of brand-name drugs. McKesson and First DataBank, raised the WAC to AWP spread from 20% to 25% for over four hundred brand-name drugs that previously had received only the 20% markup.” (Memorandum & Order, p.6)
By raising the “spread” from 20% to 25%, this alleged scheme had the effect of raising the prices of the drugs in question by 4% across the board. Tens of millions of purchases of hundreds of drugs were thus made at the new, inflated prices, cause billions in unnecessary and allegedly illegal overpayments.
In October 2006, First Databank agreed to settle the case against it. First Databank agreed to rollback the “spread” on hundreds of drugs (representing 95% of the retail branded drug market) from 25% to 20%. This rollback will save an estimated $4 billion on drug spending in the first year alone. First Databank also agreed to go out of the business of publishing Average Wholesale Price data, which will result in health plans, Pharmacy Benefit Managers, and government programs shifting away from using the flawed AWP system to using a more transparent and accurate benchmark for paying for prescription drugs. In November 2006, the Court granted preliminary approval to that settlement. Just recently, in August 2007, the Court ordered that notices be published notifying consumers of the settlement and mailed to Third Party Payors (health plans, insurers, etc.)
McKesson, however, did not settle, and the plaintiffs continued to pursue the case against it aggressively. When a case is brought as a class action, it combines the claims of many individuals and entities into one lawsuit. This is particularly important when it would be infeasible for individuals to bring lawsuits on their own, such as when the damages that could be won in such a suit would be far outweighed by the costs of bringing it. The Judge must determine whether or not a case brought as a class action should in fact proceed as a class action. This is called “class certification.” Whether or not a class action is certified usually determines whether or not the case ultimately can go forward at all.
In her August 27 order, Judge Saris certified two classes:
- 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 Second Amended Complaint and consist of certain brand-name drugs only; and
- 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.
Excluded from the Class are (a) each defendant and any entity in which any defendant has a controlling interest, and their legal representatives, officers, directors, assignees and successors; (b) any co-conspirators; and (c) any governmental entities that purchased such drugs during the class period.
At this juncture, Class 1 is certified for liability and for damages, but Class 2 is only certified for liability and for
equitable relief. I defer deciding whether to certify the TPP class for purposes of damages until plaintiffs propose a feasible aggregate damage methodology for TPPs.
The importance of this case cannot be overstated — a massive fraud was allegedly perpetrated by two pharmaceutical industry middlemen that virtually no consumers were aware even existed. McKesson Corporation, not exactly a household name, had $88 billion in annual revenues last year, and was 18th on the Fortune 500 list. This puts them ahead of AT&T (#27), Procter & Gamble (#25), Costco (#32), and Target (#33), among many other more well-known companies. This alleged conspiracy caused consumers, health plans, employers and taxpayers to unnecessarily pay billions more for prescription drugs. This case illustrates how the arcane world of prescription drug pricing, which is so important to the well-being and pocketbooks of millions of Americans, resembles a lawless wild west sorely in need of a new Sheriff. The Judge’s certification of these two classes allows the case against McKesson to go forward.
The Judge’s order can be found here and it provides an interesting and readable overview not just of this alleged scheme but also of the bizarre world of how drug prices are determined. More about this case can be found here. The press release issued by the plaintiffs’ co-lead counsel can be found here.
Friday, June 15th, 2007
n June 2005 and February 2006, members of the PAL coalition AFSCME District Council 37 Health & Security Plan and New England Carpenters Health Benefits Fund filed lawsuits alleging that First Databank and McKesson carried out an illegal scheme from 2002 to 2005 to raise the price of prescription drugs.
The case alleged that from 2002 to 2005, First Databank conspired with leading prescription drug wholesale provider, McKesson Corp., to arbitrarily increase by 5 percent the markups between what pharmacies pay wholesalers for prescription drugs (based on “Wholesale Acquisition Cost” or WAC) and what health plans and insurers reimburse pharmacies for those prescription drugs (based on “Average Wholesale Price,” or AWP). The suit alleges that McKesson used this “5% scheme” to provide a benefit to their large pharmaceutical retail chain clients, who would then earn an extra amount with each prescription, and that First Databank went along with the scheme to ease the burden of establishing accurate spreads and to curry favor with McKesson so that McKesson would use First Databank as the source of drug prices for its customers.
In October 2006, a settlement with First Databank was announced. Under the settlement, First Databank agreed to “roll back” the 5% increase on hundreds of drugs. The plaintiffs’ expert in the case estimated that this rollback would save $4 billion in drug spending in the first year. First Databank also agreed to stop publishing its “Average Wholesale Price” benchmark data within 2 years of the settlement becoming final. McKesson was not a party to the settlement, and the case against it is proceeding
As the Wall Street Journal reported earlier this week, the Judge recently gave tentative approval to an amended settlement and scheduled a date for the “Fairness Hearing” at which the Judge will evaluate the whether the settlement is “fair, reasonable and adequate” and whether it should be finally approved.
The Wall Street Journal article stated:
A federal judge has given preliminary approval to a proposed settlement that could roll back prices on thousands of prescription drugs in a case that could have implications for pharmacy operators.
The matter in U.S. District Court in Boston centers around lists of so-called average wholesale prices for brand-name drugs published by Hearst Corp. unit First Databank.
U.S. District Judge Patti B. Saris this week gave preliminary approval to the recently amended agreement between plaintiffs and First Databank, and scheduled a fairness hearing on a final settlement for Nov. 14.
The settlement could save consumers and insurers billions of dollars in drug costs while providing no monetary damages. First Databank would cut average wholesale prices for thousands of drugs by about 4% and eventually stop publishing the benchmark list.
Progress in the litigation “allows a key risk to the outlook for pharmacy operators to move along,” Morgan Stanley analyst David Veal wrote Friday.
Several retiree and worker funds alleged in the lawsuit against First Databank and major drug distributor McKesson Corp. that the two companies worked together to inflate the markup on numerous prescription drugs.
First Databank, denying wrongdoing, agreed to a settlement that requires it to pay no damages. McKesson denies wrongdoing and has been fighting the lawsuit; the plaintiffs and McKesson recently requested and received postponement of a court mediation conference.
Learn more about the First Databank lawsuit here.