Bristol Myers Squibb (NYSE:BMY) is the latest defendant to reach a settlement with plaintiffs in the massive Average Wholesale Price litigation (In re Pharmaceutical Average Wholesale Price Litigation, before Judge Patti Saris of the U.S. District Court for the District of Massachusetts). A number of PAL coalition organizations are plaintiffs in this massive case, against dozens of pharmaceutical defendants. In a nutshell, the case alleges that the defendants fraudulently and artificially inflated the “Average Wholesale Prices” (AWPs) of hundreds of physician-administered drugs. These AWPs are listed in commercial pricing publications and were used by Medicare and insurers to determine how much to pay doctors for drugs administered in doctors’ offices.

A trial of Medicare patients’ claims against BMS was originally slated to begin this coming Monday, July 23. Last month, Judge Saris issued a 183-page decision in another phase of the case, in which she found that BMS and two other defendants (Astra Zeneca and Warrick, a subsidiary of Schering-Plough) caused the publication of false and inflated Average Wholesale Prices for seven drugs. The BMS drugs were Taxol, Vepesid, Cytoxan, Blenoxane and Rubex.

The decision last month found BMS and the other defendants liabile for damages caused to classes of Massachusetts insurance companies and non-Medicare consumers in Massachusetts. The trial that was slated to begin next week concerned damages caused to a nationwide class of Medicare patients. The settlement is not surprising in the wake of Judge Saris’ decision last month. The claims of the nationwide Medicare class are based on the same facts as those that Judge Saris found in her recent decision, and the causes of action (primarily state consumer protection acts) pretty closely mirror those in that decision as well (which were based on the Massachusetts Consumer Protection Act, Chapter 93A). Thus, if the trial had gone forward, it’s likely that the facts that were established in the previous decision would have already been found to be true (known in legal parlance as “collateral estoppel”) — the only issues thus would have been whether BMS violated those other state consumer protection acts and the federal RICO statute, and the extent of damages that caused.

No settlement has been filed with the Court yet, but on July 18 Bloomberg News reported on the fact that a settlement was reached:

Bristol Avoids Trial Over Taxol Price With Settlement (Update2)

By Cary O’Reilly

July 18 (Bloomberg) — Bristol-Myers Squibb Co. agreed to settle a class-action lawsuit over prices the company charged for its Taxol cancer drug and other medicines, just before a trial was set to begin in Boston.

The company, which admitted no wrongdoing, agreed to pay $13 million to settle all claims in the nationwide suit, Bristol spokeswoman Laura Hortas said. The case, which was set for trial July 23, was filed on behalf of consumers in dozens of states who made copayments for company drugs based on prices that had been artificially inflated, according to the complaint.

U.S. District Judge Patti Saris in Boston last month ordered Bristol, AstraZeneca Plc and Schering-Plough Corp. to pay damages for overcharging on drugs through so-called average wholesale pricing, or AWP. The trial that was to begin next week concerned only copayments for Bristol drugs. Taxol generated $1.6 billion in sales in 2000 before Bristol lost patent protection for it.

“We’re quite pleased with the settlement,” plaintiffs attorney Steve Berman of Hagens Berman Sobol Shapiro in Seattle said in an interview. “Any time you get over 100 cents on the dollar in recovery for consumers, that’s pretty darn good.”

The company also agreed to pay as much as $1 million for the cost of notifying affected consumers.

Consumers made insurance plan copayments under Medicare Part B based on average wholesale prices for Bristol drugs, including Taxol, that were far higher than what the company was charging doctors and hospitals, according to the complaint.

Out of Pocket

Chemotherapy and other medicines administered in physician offices were covered under Medicare Part B, with patients in many instances paying 20 percent of those costs out of pocket. That meant any increase in the average wholesale price for Taxol could result in higher fees for patients on chemotherapy.

Saris will hold a hearing Aug. 9 to consider the Bristol settlement, according to a docket entry on her court’s Web site.

“Bristol-Myers Squibb is pleased to have reached a settlement of the Class 1 claims in the average wholesale price litigation,” Hortas said.

In an earlier case, Saris found that Bristol-Myers inflated AWP for five medications, including Taxol. The AWP price for the cancer drug was found to be as much as 500 percent higher than what was charged to doctors.

AWP, which is self-reported by drugmakers, was once used by government health programs such as Medicare to set reimbursement rates. Medicare has moved away from the system, though some private insurance plans, including Blue Cross, still use it.

Medicare Switch

Medicare, the federal health plan for the elderly, switched in 2004 from AWP to a system of paying 106 percent of the average reported sale price of a drug.

Consumers who say they were harmed by AWP pricing for more than 300 drugs sued in 2001, alleging an industrywide scheme to defraud the U.S. health-care system. The suit was carved up by Saris based on different drug types to make the litigation more manageable.

GlaxoSmithKline Plc, Europe’s biggest drugmaker, agreed in August to pay about $70 million to settle claims by state attorneys general and consumers that the company used AWP to overcharge government health programs for its medicines.

Bristol shares fell 7 cents to $32.07 as of 12:45 p.m. in New York Stock Exchange composite trading, giving the company a market value of $63.3 billion.

The case is In Re: Pharmaceutical Industry Average Wholesale Price Litigation, MDL No. 1456, U.S. District Court, District of Massachusetts (Boston).

To contact the reporter on this story: Cary O’Reilly in Washington at