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.
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.
As we reported back in August, (Abbott and plaintiffs agree to proposed Norvir settlement), Abbott Laboratories (NYSE:ABT) and plaintiffs who brought a nationwide class action challenging Abbott’s 400% price increase on its HIV/AIDS drug Norvir agreed to a settlement of between $10 million and $27.5 million. Under the settlement, the amount that Abbott would have to pay would depend on whether the Ninth Circuit Court of Appeals accepts an appeal of certain key issues in the case, and how that Court ultimately rules on those questions. For a full description of the different scenarios, and amounts that Abbott would have to pay, see the earlier post here.
Yesterday, the Ninth Circuit Court of Appeals issued an order accepting the appeal. This allows the settlement process to move forward, although how much Abbott will have to pay will remain up in the air until the Ninth Circuit issues its actual decision on the appeal.
It’s being widely reported this morning (See, for example, the WSJ article here and the AP article here) that Pfizer (NYSE:PFE) has agreed to settle the bulk of the lawsuits against it related to the increased risk of heart attacks and strokes from the painkillers Celebrex and Bextra.
The $894 Million settlement includes $745 million to settle 90% of the personal injury suits brought by patients who were allegedly physically injured by the drugs, $60 million to resolve primarily Bextra suits brought by Attorneys General in 33 states and the District of Columbia, and $89 million to settle suits brought by consumers and “third party payors” who alleged that they defrauded by Pfizer’s marketing and failure to disclose the risks of the drugs into paying for them when they otherwise would not have.
Even after the increased risks of Celebrex, Vioxx and Bextra became common knowledge, Pfizer kept Celebrex on the market, and even resumed TV ads for it, running an unusually long ad which extensively described the drug’s risks, but sought to downplay the risks by claiming that all NSAIDS (the class of drugs Celebrex is in) carry the same risks. Here is the ad:
At the time of this entry, no further details about the settlement were available, and the settlement itself had apparently not been filed in Court (Pfizer’s press release described the settlement as “Agreements in Principle”)
As we’ve previously reported on the PAL blog, GlaxoSmithKline agreed to pay $40 million to settle a national class action lawsuit brought against it on behalf of “third party payors” (health plans, union benefit funds and others). The case alleged that GlaxoSmithKline (NYSE:GSK) defrauded third party payors by failing to disclose the increased risk of suicidal thoughts and behavior among children and adolescents taking the prescription antidepressants Paxil® and Paxil CR®.
On September 30, the U.S. District Court for the District of Minnesota held a “Final Approval” hearing in the case. Lawyers for the plaintiffs, defendant and objectors all made presentations to the Court about why the settlement is “fair, reasonable and adequate” and why it should be approved. The Court issued its order granting final approval to the settlement shortly after the hearing ended.
Now that the settlement has received Final Approval, payments can be made to Third Party Payors that paid for Paxil for pediatric patients between 1998 and 2004. The deadline to submit claims forms is December 12, 2008. A letter will go out shortly to 42,000 third party payors that had previously received a notice by mail of the settlement. The letter will apprise them of the changes to the settlement that the objectors were able to negotiate, and let them know about changes to the claims form. As of this writing, the claims form had not yet been updated on the settlement website – www.pediatricpaxiltppsettlement.com. We urge third party payors to check back soon at pediatricpaxiltppsettlement.com to see if the new form has been posted, or to call the Settlement Administrator at 1-800-396-5655.
The lawsuit alleged that GlaxoSmithKline (NYSE:GSK) defrauded health plans, union benefit funds and other “third party payors” by failing to disclose the increased risk of suicidal thoughts and behavior among children and adolescents taking the prescription antidepressants Paxil® and Paxil CR®.
The three union benefit funds objected to a number of provisions in the settlement, including an extremely burdensome, if not impossible, process to file claims for a refund of 40% Paxil expenditures. The objectors argued that this process would have unfairly favored larger health plans that have easy access to diagnosis information related to individual prescriptions. Without this information, only a 15% refund was possible. Other terms of the settlement that these funds objected to included limitations on class members’ rights to object to the settlement, opt out of it, speak at the fairness hearing, or appeal approval of the settlement.
The objectors were able to negotiate significant changes to the settlement that addressed their primary concerns regarding fairness and burdensome claims filing:
In order to ensure that the settlement funds go first and foremost to health plans and union funds that paid for pediatric Paxil prescriptions, the revised settlement caps any cy pres award to a maximum of $1 million. Previously, any funds in the settlement that went unclaimed would be distributed a one or more organizations addressing children’s mental health issues.
Cy pres awards are frequently granted by Courts when there are unclaimed funds left in a class action settlement. Such awards are supposed to benefit class members who did not file claims. However, the cy pres award in this settlement will not go to benefit the health plans that paid for Paxil, but rather to children’s mental health organizations. While those organizations no doubt do invaluable work, the benefit to the class members here is indirect at best.
Class members’ claims will be calculated in two “stages.” In the first stage, class members that are able to document individual prescriptions that were for Major Depressive Disorder will get refunds of 40% for those prescriptions. All other prescriptions will be refunded at 15%. In the second stage, the remaining settlement funds (after the $1 million cy pres award) will be distributed to all class members who file claims, based on their proportions of the total Paxil purchases claimed by all class members.
Class members will not be required to include rebates and discounts in their calculations of the net cost of each prescription. The objectors had argued that it would be impossible for many, if not most, class members to make the calculation with rebates and discounts included. This is because in most cases, manufacturers give rebates to a health for all of their purchases of all of that company’s drugs – it’s not possible to separate what rebates were for Paxil, for instance, as opposed to for another GlaxoSmithKline drug.
Lastly, the revised settlement gets rid of the provisions that attempted to limit the rights of class members to opt out or appeal the approval of the settlement.
Because these changes addressed their most pressing concerns, the objectors withdrew their objection. The objectors and PAL thus now support the revised settlement and will argue in favor of the Court approving it at the Final Approval hearing scheduled for September 30, 2008 in the U.S. District Court in Minneapolis, Minnesota.
The objection by PAL’s members underscores the important role that PAL plays in monitoring pharmaceutical class action settlements to ensure that they adequately protect the rights of consumers and smaller third party payors, health plans and union funds. To find out more about PAL’s coalition of consumer advocates and union benefit funds, and how to join, click here.
How to file a claim for reimbursement from the settlement:
Any private insurers, employee welfare benefit plans, union health and welfare funds, employer-sponsored health plans, and other third-party payors (“TPPs”) that reimbursed, purchased, or paid for Paxil® (in both tablet and suspended form) and Paxil CR® prescribed to persons under 18 years of age, from January 1, 1998 through December 31, 2004 are eligible to submit claims forms for payment from the settlement. The deadline to submit claims for payment from the settlement is December 12, 2008.
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.
We’re pleased to announce that SEIU Health & Welfare Fund, the two individual plaintiffs in the class action and Abbott agreed to a proposed settlement of the case on August 13, 2008. Abbott has agreed to pay between $10 Million and $27.5 Million, depending on court rulings to come, to settle the nationwide claims by consumers who were overcharged for the medicine.
There have been a number of important decisions by the Court to date that have set the stage for this settlement. On June 11, 2007, the Court certified the case as a nationwide class action. On May 16, 2008 the Court issued a ruling that was a partial victory for the plaintiffs and a partial victory for Abbott. The Court held that Abbott could not claim a patent that it holds on Norvir as a defense to the plaintiffs’ claims (the partial win for the plaintiffs). However, the Court also dismissed the plaintiffs’ claims for “unjust enrichment.” These claims alleged that Abbott was “unjustly enriched” by its allegedly illegal Norvir price hike.
What’s important about this dismissal is that these common law unjust enrichment claims were the only nationwide claims for monetary damages (as opposed to claims for “injunctive relief,” that is, for changes in company practices) in the case. When the Court dismissed these claims, the only claims for damages that remained in the case were under California state law. Thus, in a nutshell, after the Court’s May 16 order, the case for monetary damages was narrowed to cover just consumers and health plans in California.
Abbott had asked the Court to allow an “interlocutory appeal.” This means, basically, that Abbott asked the District Court to ask the 9th Circuit Court of Appeals to make a decision on a particular question of antitrust law that Abbott felt could determine the outcome of the case. The Court refused, since the trial was at that point only three months away.
The proposed settlement attempts to get the Court of Appeals to resolve this and several other legal issues, and to tie the amount of the settlement to the decisions of the Court of Appeals. Abbott and the plaintiffs will ask the court hearing the case (the federal District Court for the Northern District of California) to allow them to appeal three legal issues to the 9th Circuit immediately. These legal issues are ones that have been essential to the plaintiff’s success so far, and which Abbott would likely appeal if the plaintiffs were to win at trial.
There are several different forms the settlement could take, depending on how this appeal goes:
If the District court ”certifies” all three questions up to the Ninth Circuit for appeal, and the Ninth Circuit accepts at least two of them, Abbott will pay a non-refundable $10 Million in to a settlement fund. That $10M (and possibly more – see below) would eventually be distributed to 13 different non-profit organizations that benefit people with HIV/AIDS. (See a list of those organizations here).
How much Abbott would have to pay beyond the initial $10M depends on how the 9th Circuit rules on the appeals questions:
If Abbott wins the appeal of any of the three questions before the Ninth Circuit, then it doesn’t pay anything beyond the initial $10M.
If the plaintiffs win on all the questions before the 9th Circuit, then Abbott must contribute another $17.5 Million to the settlement fund.
If the 9th Circuit “remands” (sends back) the case to the District Court for any reason (such as asking the District Court to make findings of fact), then Abbott must contribute only $4.375 Million more to the settlement fund.
In a nutshell, Abbott will ultimately pay between $10M and $27.5M. After the attorneys’ fees and expenses are paid (approximately 1/3 of the total), here is how the rest of the settlement will be divided:
If Abbott wins any one of the questions before the Ninth Circuit, then the $10M, reduced to $6-7 M after costs and attorneys’ fees, will be distributed equally to all the cy pres recipients on the list above.
If, however, the court remands any question, or if the Plantiffs win all the questions, then the settlement amount ($14.3M or $27.5M respectively, before legal costs and fees, or between $9.6 and $18.4M after) will be divided, with
70% of it (between $6.7M and $12.8M approximately) going to the 13 organizations described above, and
30% (between $2.9M and $5.5M approximately) going to consumers and TPPs in California)
Confusing? Yes. But the settlement is a creative resolution of the lawsuit. It takes into account the different possible outcomes to a trial and inevitable appeal, and essentially adjusts the amount of the settlement accordingly.
The Court has scheduled a hearing for August 19 on whether to grant “preliminary approval” to the Settlement. If it does grant that approval, notice will be published to alert members of the class about the proposed settlement. Consumers and TPPs that paid for Norvir will have the option of opting out of the settlement (if they want to pursue their own individual lawsuits against Abbott), objecting to the terms of the settlement, and, if they are located in California, filing claims forms to receive a portion of the settlement proceeds. The Court will schedule a Final Approval hearing for several months from now. After that hearing, the Court will decide whether to grant Final Approval to the settlement. If it does grant that approval, and after any appeals, the money in the settlement will be distributed as described above.
Below is a press release that we here at Prescription Access Litigation (PAL) issued today. Three members of the PAL coalition filed a formal objection to a settlement proposed in the class action lawsuit, Carpenters & Joiners Welfare Fund et. al. v. SmithKline Beecham, (U.S. District Court, Minnesota, Case #04-cv-3500). Details of the settlement are at www.pediatricpaxiltppsettlement.com.
Labor Unions File Objection to Paxil Pediatric Class Action Settlement Union Benefit Funds Criticize Settlement as Unfair, Call on Court to Reject it
Boston, MA – Three labor union benefit funds filed a formal objection yesterday to the proposed $40 million nationwide settlement of a class action lawsuit against GlaxoSmithKline (NYSE:GSK). The lawsuit alleged that Glaxo defrauded health plans, union benefit funds and other “third party payors” by failing to disclose the increased risk of suicidal thoughts and behavior among children and adolescents taking the prescription antidepressants Paxil® and Paxil CR®. The $40M settlement is to reimburse third party payors for payments they made to pharmacies for Paxil prescribed to children and adolescents from 1998 to 2004.
Under the terms of the proposed settlement, TPPs can be reimbursed up to 40% of their costs for Paxil prescribed for Major Depressive Disorder, while all other prescriptions for Paxil for other conditions will only be reimbursed at 15%. This requires TPPs to list a diagnostic code for each and every pediatric prescription for Paxil that they paid for during the seven year period. The objectors challenged this distinction, arguing that almost no one will really get a 40% refund, because almost no TPPs have diagnostic codes for the prescriptions they pay for.
In addition, millions of prescriptions for Paxil were written during the seven years covered by the lawsuit (1998-2004), yet the settlement requires any claim for more than $1,000 in reimbursement to include exhaustive details regarding every individual prescription of Paxil paid for during that seven-year period.
The funds also objected to other requirements, including the way that TPPs are required to calculate the net cost of the payments they made, and to misleading and inaccurate statements in the settlement notice about class members’ rights to object, appear at the hearing, or appeal final approval of the settlement.
“A $40 million settlement may sound very positive, but the devil is very much in the details,” said Gina Alongi, Administrator of IUOE Local 4 Health and Welfare Fund. “The way the settlement is currently structured will prevent many health plans and union benefit funds like ours from getting any real compensation from it.”
The three union funds objecting to the settlement are all members of Prescription Access Litigation (PAL), a national coalition of more than 130 unions and consumer advocacy groups that works to challenge illegal practices by the pharmaceutical industry.
“TPPs will have to comb through mountains of medical records and bury themselves in paperwork before they ever see a penny from this settlement,” said Alex Sugerman-Brozan, director of PAL. “Class action settlements are only as good as their claims process, and this one fails at a very fundamental level.”
Last year, Prescription Access Litigation objected to an earlier Paxil class action settlement (Hoorman et. al. v. SmithKline Beecham). That $63M settlement was of a class action brought on behalf of consumers who paid for Paxil prescriptions for children and adolescents. As a result of that objection, important changes protecting consumers’ rights were made to the settlement.
A settlement of a class action must be approved by the Court where the case is brought. Because class actions affect the rights of people and entities that aren’t even aware of the lawsuit, the Court reviews settlements to make sure they are “fair, reasonable and adequate.” Members of the class may object to the settlement, and request to speak at a hearing before the Court.
The case is Carpenters and Joiners Welfare Fund et. al. v. SmithKline Beecham Corp. (U.S. District Court for Minnesota, Case #04-CV-3500). The Final Approval hearing in the case is scheduled for September 30, 2008 in the U.S. District Court in Minneapolis, Minnesota. The deadline for third party payors to submit claims for payment from the settlement is December 12, 2008. More information about the settlement, including claims forms, can be found at www.pediatricpaxiltppsettlement.com. A full copy of the funds’ objection to the settlement can be found at www.prescriptionaccess.org/docs/pediatric-paxil-objection.pdf
About AFSCME District Council 37 Health & Security Plan
AFSCME District Council 37 Health & Security Plan is a union benefit fund that provides supplemental health and welfare benefits, including a prescription drug benefit, to over 300,000 individuals, consisting of active municipal employees, their spouses and dependants, as well as retirees, who work or worked for New York City, the New York State Court System, various authorities, cultural institutions and the NYC Health and Hospital Corporation.
About Sergeants Benevolent Association Health and Welfare Fund
Sergeants Benevolent Association Health and Welfare Fund provides supplemental health and welfare benefits, including a prescription drug benefit, to 10,000 active and retired sergeants of the New York City Police Department.
About IUOE Local 4 Health and Welfare Fund
IUOE (International Union of Operating Engineers) Local 4 Health and Welfare Fund provides a health and welfare plan, including a prescription drug benefit, to 10,000 covered members of IUOE Local 4 and their families. IUOE Local 4 represents heavy equipment operators, apprentices, mechanics, surveyors, equipment house employees, as well as waste water technician and some public sector employees in Eastern Massachusetts, Eastern New Hampshire and Maine.
About Prescription Access Litigation Prescription Access Litigation (PAL) is a nationwide coalition of over 130 state, local, and national senior, labor and consumer health advocacy groups fighting to make prescription drugs affordable. The organizations in the PAL coalition have a combined membership of over 13 million people. PAL, a project of the national nonprofit health care advocacy group Community Catalyst, 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. PAL members have filed more than 30 lawsuits targeting such practices. News about PAL’s cases and public education efforts is published regularly on the PAL Blog.
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:
Aventis Pharmaceuticals Inc.
Hoechst Marion Roussel
Baxter Healthcare Corp.
Baxter International Inc.
Fujisawa Healthcare, Inc.
Fujisawa USA, Inc.
Pharmacia & Upjohn LLC
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.