PAL’s most important lawsuit and settlement to date wins final approval!

Yesterday, the Massachusetts federal District Court approved class action settlements with publishers First Databank and MediSpan that will require the roll back the illegally inflated prices of over 400 drugs!

PAL coalition members AFSCME District Council 37 Health and Security Plan in New York, and New England Carpenters Health Benefit Fund here in Boston brought the lawsuit against these two publishers, and the pharmaceutical wholesaler McKesson, for their role in unilaterally raising the prices of over 400 drugs through their alleged manipulation of the published “average wholesale price” or AWP. Though the system of pharmaceutical pricing and reimbursement is complex, the AWP is a benchmark that is used by insurers and government programs to reimburse pharmacies. It also effects the cost to cash-paying customers. It is alleged that defendants First Databank, Medispan, and McKesson raised the AWP, while keeping the actual cost (called a ‘wholesale acquisition cost’) the same. This done to give  the large chain and other pharmacies, many of which are McKesson’s customers, an increased return on each of these drugs.

It has been estimated that this 5% increase in the cost of hundreds of drugs by the defendants may have cost consumers, insurers, and government programs over $2 billion in additional drug expenses.

It is estimated that the “rollback” of the price of these 400 drugs could yield between $1.5 Billion or more in future savings on drug costs. Perhaps of even greater importance, this lawsuit, along with other litigation (AWP, Remicade, Lupron) by PAL members, has exposed the weaknesses of the pharmaceutical pricing system that have allowed drug makers and wholesalers to manipulate or “game” the benchmark prices that government programs and insurers use for reimbursement.

The Judge in the case did allow a six month delay before the rollback of the drug prices, ” to alleviate the impact on independent and rural pharmacies.” This addressed the concern raised that small ‘mom and pop’ pharmacies may be forced to bear the full cost of the price rollback if they were unable to renegotiate their supply contracts for drugs with manufacturers and wholesalers.

The settlement also provides $2.7 million to be distributed along with the $350 Million in the preliminary McKesson settlement.

Thanks to PAL members New England Carpenters Health Benefit Fund, and AFSCME District Council 37 Health and Security Plan in New York for their work in bringing this important lawsuit.

Follow these links to see a copy of the Judge’s decision, the First Databank settlement, the Medispan settlement, or the pending McKesson settlement.