Attorneys representing consumers prepare for $12 billion RICO trial against McKesson for alleged drug price manipulation

08/29/2008

SEATTLE – Attorneys representing consumers in a case accusing McKesson (NYSE: MCK) of illegally rigging the price of virtually every prescription drug have crossed the final procedural hurdles and are now preparing for a trial set for December 1 in U.S. District Court in Boston.

Attorney Steve W. Berman filed the suit in 2006 on behalf of third-party payers and consumers, claiming that McKesson engaged in a scheme to fraudulently inflate the price of more than 400 prescription drugs, including blockbusters such as Prozac, Lipitor, Zocor, Vioxx and more.

On March 18, 2008, Judge Patti Saris for a second time rejected McKesson's motions to dismiss the case, citing the strength of the evidence, which includes volumes of e-mail exchanges by McKesson executives discussing the price-fixing scheme. The plaintiffs in the case peg the damages at $4 billion, which puts McKesson at risk of a $12 billion judgment with the tripling of damages allowed by the RICO statute under which the suits were filed.

RICO - the Racketeer Influenced and Corrupt Organizations Act - allows for civil action against those believed to participate in conspiracies to commit crimes or illegally reap profits. The law calls for the disgorgement of ill-gotten profits and the tripling of damages.

Judge Patti Saris earlier this week dismissed a related case charging the drug giant of antitrust violations.

"We believe the antitrust laws were intended to address the sort of disingenuous behavior McKesson exhibited, but we recognize that the allegations presented a context not directly addressed by prior case-law," Berman said. "We understand and appreciate Judge Saris' ruling, and are eager to move forward with the strongest case - the RICO charges."

The case represents two classes: consumer purchasers, which includes anyone who made a co-payment for prescription medication from August 1, 2001 through May 15, 2005, and all third-party payers that made a payment or reimbursement based on the inflated average wholesale price (AWP) during the class period.

The suit claims McKesson and First DataBank, a publishing company, reached a secret agreement on how the average wholesale price would be set for brand-name drugs and, in doing so, raised the spread between the published AWP and the actual acquisition costs from 20 to 25 percent in an effort to increase profits.

Earlier this year, First DataBank settled with plaintiffs, leaving McKesson as the sole defendant.

According to documents cited in the case, McKesson communicated the price increase to First DataBank, who published the information, even amid questions by manufacturers who recognized the impact to consumers and third-party payers. McKesson did so to raise the profits for its large clients like Rite Aid and Walgreen's.

For more information on this case and to sign up as a consumer or third-party payer you can visit the Hagens Berman Web site at www.hbsslaw.com.

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About Hagens Berman
Hagens Berman Sobol Shapiro LLP is a consumer-rights class-action law firm with offices in nine cities. The firm has been named to the National Law Journal’s Plaintiffs’ Hot List seven times. More about the law firm and its successes can be found at www.hbsslaw.com. Follow the firm for updates and news at @ClassActionLaw.

Contact
Ashley Klann
ashleyk@hbsslaw.com
206-268-9363


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12/31/06: Case Settled

In late 2006, a settlement was reached with one of the defendants, First DataBank, and in 2008 McKesson agreed to a $350 million settlement for allegedly inflating the price of more than 400 prescription drugs by manipulating drug-pricing benchmarks. Hagens Berman confirmed that more than 315,000 reimbursement checks were distributed by mail to eligible cash-payor consumer class members and “pharmacy” class members.