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.

From the “Aw Shucks” department:

Our humble blog here at Prescription Access Litigation has been named one of the Top 50 Medical Ethics Blogs by the website USPharmD.

To see the full list, go here.

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.

The order can be found here.

As we reported last month, PAL coalition member Change to Win launched a campaign to challenge CVS Caremark’s [NYSE:CVS] sending of a letter to doctors of specific patients, apparently promoting Merck’s [NYSE:MRK] diabetes drug Januvia. Change to Win launched a website for the campaign, Alarmed about CVS Caremark.

This week, Change to Win announced a broader campaign targetting CVS, Cure CVS Now. On Thursday, December 4, Change to Win held press conferences around the country to announce & launch the campaign, and to issue a report on CVS’s practices, Cure CVS: From Low Quality to High Prices, CVS Is Failing Our Communities.

The press conference in Boston featured speakers from a number of community & labor organizations in the Greater Boston area, including the very young:

At the Cure CVS website describes:

CVS’s growth has come at a high price for many of the communities in which CVS operates. The company’s mission is "to improve the lives of those we serve by making innovative and high-quality health and pharmacy services safe, affordable and easy to access." But, according to the results of a 14-month investigation, CVS actually fails to provide equal and fair access to its services, based on analyses of several key measures. And regulators have raised concerns about quality, overcharges, privacy protection and safety related to CVS.

Explore the issues around some of those concerns:

• CVS Fails to Provide Equal Access
• CVS’s Questionable Products and Services
• CVS May Not Offer a Fair Price
• CVS’s Failure to Protect Private Information
• CVS’s Press for Profits May Put Patient Care at Risk

Change to Win’s investigation and report focus primarily on the “retail,” non-pharmacy side of CVS’s business. We hope that they will also investigate practices and quality at the pharmacy counter. We here at PAL and our coalition members work on numerous aspects of how the pharmaceutical supply affects consumers, but we know that the pharmacy counter is “where the rubber meets the road.”

Since CVS is the nation’s largest pharmacy chain, the public should know how CVS is measuring up on things like pricing of drugs to the uninsured, encouraging use of generics, working conditions for pharmacists and pharmacy technicians (which of course affects consumers as well — in terms of quality of service and prevention of errors), protecting the privacy of patient prescription records, ensuring that patients understand how to take their drugs, etc.

We’ll continue to post updates on Change to Win’s campaigns concerning CVS as they become available.

This past Wednesday, the Prescription Project, a sister project to PAL at our parent organization, Community Catalyst, filed four petitions with the FDA raising concerns about online advertising of medical devices and drugs on YouTube.com. The petitions cited ads posted on YouTube by Abbott Laboratories (NYSE: ABT), Medtronic (NYSE: MDT) and Stryker (NYSE: SYK).

Within hours, the two videos about Medtronic and Stryker’s devices cited by the Prescription Project were removed, and the remaining videos about an Abbott Laboratoriess device were labeled with safety information, and removed from public access the next day.

The Prescription Project’s petitions have gotten widespread media attention, including articles in the Wall Street Journal, Associated Press, Crain’s Chicago Business, Chicago Tribune, Minneapolis Star Tribune, and Pioneer Press.

The Prescription Project’s press release on the petition is here.

Here is the entry from PostScript, the Prescription Project’s blog, about the request for FDA action:

Devicemakers’ bypass marketing rules on YouTube
December 3rd, 2008

Today the Prescription Project filed a series of citizen petitions with the FDA asking that six YouTube videos be removed immediately from the self-broadcast internet supersite because they appear to have been posted by medical device manufacturers, but do not contain the federally-mandated warnings or provisions required of medical device advertisements.

The videos include four posted by Abbott Laboratories about its XIENCE-V drug eluting stent, one for Medtronic’s Prestige® Cervical Disc, and one for Stryker’s Cormet™ Hip Resurfacing Technology. Here they are.

The Prescription Project is petitioning the FDA, which is charged with regulating the marketing of approved medical devices as well as prescription drugs, to require the makers to remove the ads from YouTube immediately and to post “curative” ads that contain the proper risk information. In addition, the Project calls on the FDA to:

• Advise all major prescription drug manufacturers and medical device manufacturers that online/Internet drug and device advertisements and promotions are subject to the same requirements as drug and device promotions in other media, and recommend that they review their online advertisements for compliance.

• Issue a Guidance on Consumer-Directed Broadcast Advertising of Prescription Drugs and Restricted Devices on the Internet to clarify how federal law and FDA regulations apply to online drug and device promotions.

But who watches YouTube for info about health, anyway? Well, it seems that number is growing rapidly. According to a 2007 survey conducted by the Pew Internet and American Life Project, somewhere between 75% and 80% of internet users have looked online for health information. And a Manhattan Research poll about physician online habits released just last month found that 83% of physicians watch video clips online, as compared with 34% of all US adults.

So statistically, these ads are being seen by both patients and doctors. And without the proper risk information that’s required in other broadcast drug device advertising, that’s a problem.
In fact, we think it’s an even bigger problem because consumers injured by medical devices can no longer sue device manufacturers for failing to warn them about known but undisclosed risks, a result of the February 2008 Supreme Court decision in Riegel v. Medtronic. And consumers injured by prescription drugs may well lose that same right if the Supreme Court issues a similar ruling in Wyeth v. Levine, a case argued before the Court last month.

To read the petitions and view the videos, go here.