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.
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.
Deadline for claims in the $125 Million settlement of the AWP litigation is this week!
You may be eligible for payment if you received a physician-administered drug between January 1, 1991 and January 1, 2005 for the treatment of different types of cancer, HIV, allergies, infections, inflammation, pain, gastrointestinal problems and lung and blood issues. The following 200 prescription drugs, listed at http://awptrack2settlement.com/pdfs/Class_A_%20and_Class_B_Drug_List.pdf were usually, but not always, administered in doctor’s offices (i.e. usually through injections or IVs).
You are eligible to file a claim for a reimbursement from the settlemen if you paid a percentage co-payment for any of these 200 drugs. This includes both people on Medicare Part B (who should have received a yellow post card in the mail) and people not on Medicare (who need to file a claim form that can be downloaded from the settlement website at http://awptrack2settlement.com/index.htm or requested by calling 877-465-8136.)
Your claim form must be postmarked or received by this Saturday, January 31, 2009.
A spouse of a deceased consumer who made such a co-payment or a legal representative of a deceased consumer’s estate may file a claim in the place of the deceased consumer.
The payments are the result of a $125 million settlement that dealt with consumers being over-charged for the prescription drugs. Back in September, 2008, Prescription Access Litigation reported that 11 defendant pharmaceutical drug manufacturers in the In re Pharmaceutical Industry Average Wholesale Price Litigation lawsuit had agreed to settle the case for $125 million. The lawsuit alleged that several dozen drug companies illegally inflated the price of these and other prescription drugs.
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.
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.
Numerous state Attorneys General have filed lawsuits against pharmaceutical companies for allegedly fraudulently inflating the “Average Wholesale Price” of prescription drugs that states pay for on behalf of Medicaid recipients. The “Average Wholesale Price” (AWP) is a benchmark that drug companies report to drug pricing publishers like First Databank, Inc. State Medicaid programs and private health plans use the AWP to determine how much to pay pharmacies for drugs. When a drug company inflates its products’ AWPs, states end up overpaying pharmacies for drugs dispensed to their Medicaid recipients, state employees and others.
More than 20 states’ Attorneys General have filed suit lawsuits, and there have been a number of settlements. The latest was announced on Friday, settling a suit that Missouri Attorney General Jay Nixon brought against Schering-Plough Corp. (NYSE:SGP), Warrick Pharmaceuticals, and Schering Corp. (the latter two are subsidiaries of Schering-Plough). Schering-Plough agreed to pay $31 million after a jury decided on Thursday October 30 to award $7.3 in compensatory damages. The jury had not yet made a decision on whether to award punitive damages, which can often be quite higher. Schering originally announced their intention to appeal the Jury’s $7.3M award, but then on Friday announced that they decided to settle the case.
Interestingly, back in August, the Post-Dispatch ran a somewhat amusing article reporting that the jury that was originally selected for the trial had to be dismissed after jurors began moaning and groaning about having been selected (“Jurors’ moans prompt judge to dismiss panel in lawsuit” [no current link available]), which said:
The excuses usually begin before the jury is selected.
But on Tuesday, jurors stepped forward to complain after they were selected for a closely watched Medicaid fraud trial.
The judge then delayed the lawsuit trial, which had already consumed a good deal of time and expense for several lawyers for Missouri and the pharmaceutical companies the state is suing.
After the jury was selected, some jurors indicated their reluctance to serve to Circuit Judge David L. Dowd, who had told them the trial might last two weeks. Other jurors just moaned as they moved towards the jury box and prepared to take an oath. Dowd then asked the jurors what was the matter. He then asked attorneys for a private conference. Both sides agreed that the trial — which had been set on the calendar 18 months ago — could not proceed with this panel.
In April 2006, Missouri settled another AWP fraud case, with Dey Pharmaceuticals, for $2.9M.
In February 2008, a jury ordered Astra Zeneca to pay the state of Alabama $40 million in compensatory damages and $175 million in punitive damages for inflating AWPs. The Judge later reduced the punitive damages to $120 million.
Several members of Prescription Access Litigation’s coalition are plaintiffs in a massive national class action lawsuit that alleges that drug companies inflated the AWPs of injectable and other physician-administered drugs covered by Medicare Part B. There have been several settlements in that case:
GlaxoSmithKline: $70 million to settle all claims. Settlement info here.
Astra Zeneca: $24 million to settle claims of Medicare beneficiaries. Settlement info here.
Eleven drug companies: $125 million to settle all claims. Settlement info here.
Back in March, we reported that 11 defendants in the massive In re Pharmaceutical Industry Average Wholesale Price Litigation case had agreed to settle the case against them for $125 million (11 drug companies settle AWP allegations for $125 Million“). The Court hearing the case granted “preliminary approval” to that settlement this Summer, and now notices are being sent out to certain people on Medicare, published in a number of newspapers and magazines, and even being broadcast on TV (you might have seen these ads if you were watching MSNBC during the conventions).
The case alleged that several dozen drug companies illegally inflated the price of prescription drugs that are administered in doctor’s offices (i.e. usually through injections or IVs). Consumers who paid a percentage co-payment for any of these approximately 200 drugs (see here for the list) are eligible to submit claims forms to get a reimbursement from the settlement. Claims forms must be postmarked or received by January 31, 2009. The drugs are primarily for the treatment of different types of cancer, HIV, allergies, infections, inflammation, pain, gastrointestinal problems and lung and blood issues.
Consumers who are eligible to receive payments from the settlement include both people on Medicare Part B (who received a yellow post card in the mail) and people not on Medicare (who need to file a claim form that can be downloaded from the settlement website or requested by calling 877-465-8136.
Details of the settlement, how to file claims, how to exclude yourself, etc, can be found at AWPTrack2settlement.com or by calling 877-465-8136.
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.
A $125 million settlement has been announced in a major class action lawsuit involving members of the Prescription Access Litigation (PAL) coalition. The case, In re Pharmaceutical Industry Average Wholesale Price Litigation, was originally filed in 2002, and claimed that the defendant drug companies intentionally inflated reports of the Average Wholesale Prices (AWPs) on certain prescription drugs administered in doctors’ offices and paid for by Medicare Part B. The PAL member organizations that are plaintiffs in the lawsuit are:
Until 2006, the published AWP was used to set the price that Medicare and consumers making Medicare Part B co-payments pay physicians for these drug. Private insurance companies and other third-party payors also use the AWP to determine how much to pay physicians. The lawsuit contends that
consumers and third-party payors paid more than they should because of the drug companies’ false AWP reporting.
The settlement includes branded and generic drugs used primarily in the treatment of cancer, HIV and other serious illnesses. Under the terms of the settlement 82.5 percent of the settlement fund is designated for third-party payors’ claims and the remaining 17.5 percent is designated for consumer claims.
The defendants included in today’s settlement are:
Abbott Laboratories
Amgen Inc.
Aventis Pharmaceuticals Inc.
Hoechst Marion Roussel
Baxter Healthcare Corp.
Baxter International Inc.
Bayer Corporation
Dey, Inc.
Fujisawa Healthcare, Inc.
Fujisawa USA, Inc.
Immunex Corporation
Pharmacia Corporation
Pharmacia & Upjohn LLC
Sicor, Inc.
Gensia, Inc.
Gensia Sicor Pharmaceuticals, Inc.
Watson Pharmaceuticals, Inc.
ZLB Behring, L.L.C.
Drugs covered in this settlement include Aranesp, Epogen, Neupogen, Neulasta, Anzemet, Ferrlecit and Infed. A full list of the drugs covered by the settlement is available here.
Medicare Part B recipients, health plans and individuals who paid for these drugs but were not on Medicare will be eligible to receive payments from this settlement once the Court finally approves it. The following types of individuals and entities will be eligible:
Patients on Medicare Part B who paid a percentage (i.e. not a fixed copayment, but 10%, 20%, etc.) of the cost of one of the drugs in the case, taken between Jan. 1, 1991 and Jan. 1, 2005.
Health Plans and other Third Party Payors who paid all or part of a Medicare Part B recipient’s percentage co-insurance for one of the drugs.
Individuals not on Medicare Part B who paid all or part (a percentange) of the cost of one of the drugs taken between Jan 1, 1991 and March 1, 2008.
Health plans and other Third Party Payors who paid all or part of the cost of one of the drugs taken by an individual not on Medicare part B between Jan 1, 1991 and March 1, 2008.
The Court will hold a “preliminary approval” hearing this Friday. If the Court grants preliminary approval to the settlement, notices will be mailed to Medicare Part B recipients and Third Party Payors, and published online and in a variety of national publications. Class members will have the opportunity to file a claim form, object to the settlement, opt out of the settlement or file an appearance with the Court. The court will eventually hold a final hearing to approve all settlement details.
This settlement is the third one announced in this AWP litigation. Iin August 2006, GlaxoSmithKline (NYSE: GSK) agreed to a nationwide $70 million settlement and in May 2007 AstraZeneca agreed to a $24 million settlement to Medicare Part B Zoladex users nationwide. After a trial in late 2006 and early 2007, the court in November 2007 ordered AstraZeneca (NYSE: AZN) and Bristol-Myers Squibb (NYSE: BMS) to pay nearly $14 million to insurance companies and consumers in Massachusetts for the companies’ roles in unfair trade practices. Those companies are appealing that ruling.
The court is expected to set a trial date for remaining claims against AstraZeneca and BMS on behalf of insurance companies and consumers outside of Massachusetts.
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.
Below is the press release that PAL issued today on this important development:
_____________________________________
FOR IMMEDIATE RELEASE
November 2, 2007
Consumer Groups Applaud Federal Court Decision in Drug Price Fraud Case Judge Awards “Double Damages” against Astra Zeneca and Bristol Myers Squibb
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.
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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.
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