Court approves $350 million settlement in drug pricing fraud lawsuit
Director of Regulatory Compliance and Contract Procurement
AFSCME District Council 37 Health & Security Plan
BOSTON — A Massachusetts federal court today gave final approval to a settlement that awards $350 million to consumers and insurers who were victim to a widespread fraudulent scheme affecting the prices of over 380 popular prescription drugs, such as Adderall, Advair, Allegra, Ambien, Celebrex, Clarinex, Claritin, Coumadin, Levaquin, Lipitor, Nasonex, Nexium, Ortho Tri-Cyclen, Plavix, Prevacid, Prilosec, Protonix, Prozac, Risperdal, Seroquel, Topamax, Valium, Valtrex, Zantac, and Zyprexa. The settlement is the largest-ever in a class action lawsuit based on fraudulent drug pricing.
The lawsuit alleges that the drug wholesaler McKesson Corp, one of the U.S.’s largest health care corporations, conspired with publishers First DataBank and MediSpan to raise the prices of hundreds of drugs by 5 percent in 2001. This conspiracy is alleged to have cost insurers, consumers, and government programs over $7 billion between 2002 and 2005.
Thanks to the $350 million settlement, all non-governmental insurers, health insurance plans, union benefit funds and self-insured employers who paid a pharmacy for any of these 386 prescription drugs on behalf of their members are eligible to receive part of their $288 million portion of the settlement. The remaining $62 million will benefit consumers who purchased these 386 drugs, either out of pocket, or through a percentage co-payment.
“This settlement is a great benefit to self insured plans everywhere, as well as consumers, who are struggling to pay for rising drug costs,” said Cynthia Chin-Marshall, Administrator of AFSCME District Council 37 Health and Security Plan, a lead plaintiff in the case. “But we need to make sure these schemes don’t happen in the future. We need a reliable benchmark for what drugs really cost, and government oversight too.”
In related litigation with co-defendants FirstDatabank and MediSpan, the court approved two settlements on March 17, 2009 that will rollback the future price of these 386 brand name drugs.
“This settlement is an important alternative to the relentless barrage of news announcing escalating health care costs” said Mark Erlich, Executive Secretary-Treasurer of co-lead plaintiff New England Regional Council of Carpenters. “We hope it sends a message to consumers and payers that you can challenge fraud and greed in the industry.”
Consumer watchdog group Prescription Access Litigation (PAL), which helped find insurers and consumers to help bring the case, said today’s agreement also underscores the need for reliable reimbursement prices and transparency as part of health care reform.
“Aside from the hundreds of dollars that tens of thousands of consumers will receive, the litigation has also shown how easily our health care system can be fraudulently manipulated for private profit,” said PAL Director Wells Wilkinson. “Looking forward, we know that the $80 billion drug industry deal negotiated with President Obama to reduce drug costs for seniors in the donut hole under Medicare needs to be monitored closely to make sure those savings don’t go up in smoke.”
The 130-member PAL coalition, a project of the national non-profit organization Community Catalyst, has played a major role in several illegal pharmaceutical pricing cases. One lawsuit resulted in over $220 million in settlements with more than 11 of the country’s largest drug makers.
About Community Catalyst
Community Catalyst is a national non-profit advocacy organization dedicated to quality affordable health care for all. Since 1997, Community Catalyst has been working to build the consumer and community leadership required to transform the American health system. With the belief that this transformation will happen when consumers are fully engaged and have an organized voice, Community Catalyst works in partnership with national, state and local consumer organizations, policymakers, and foundations, providing leadership and support to change the health care system so it serves everyone—especially vulnerable members of society. For more information, visit www.communitycatalyst.org.
Plaintiffs AFSCME District Council 37 Health and Security Plan and the New England Carpenters Health Benefits Fund are represented in the case by Hagens Berman Sobol Shapiro, one of the most experienced law firms in the country in large-scale public-impact litigation.
Co-lead plaintiff AFSCME District Council 37 Health and Security Plan (www.dc37.net) provides a wide array of health and welfare benefits, including a prescription drug benefit, for 125,000 represented municipal employees and 50,000 retirees of the City of New York, various authorities and cultural institutions, plus their spouses and dependants for a total of 300,000 covered lives.