Nationwide Class Action Certified in Average Wholesale Price Litigation
BOSTON - Last week a United States District Court judge certified a nationwide class-action lawsuit against McKesson Corporation (NYSE: MCK) that could become the largest class action in the United States, potentially totaling $7 billion in damages for consumers and third-party payers.
The lawsuit, filed by Seattle-based Hagens Berman Sobol Shapiro in 2006 on behalf of third party payers and consumers, claims 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.
"We have been fighting this battle on behalf of smaller groups for years," said Hagens Berman managing partner and lead attorney Steve Berman. "With this ruling we now have the opportunity to represent millions of Americans nationwide who have been affected by McKesson's unlawful practices."
The judge's ruling allows this case to move forward on behalf of 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 original lawsuit claims McKesson and First DataBank, a publishing company, reached a secret agreement on how the average wholesale price would be set for brand-named 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.
According to documents cited in the court's order 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.
In her ruling, Judge Saris cited internal documents where McKesson boasted that by the end of 2004 nearly "99%" of all brand-name drugs were set at a higher price as a result of the scheme. The order also noted that pharmacy benefit managers (PBMs) benefited from the scheme and cited a top secret Express Scripts document where an executive cautioned to "put a lid on" the financial benefit ESI was receiving from the price increase.
Attorneys estimate that damages on behalf of consumers could total from $200 to $800 million and damages on behalf of third-party payers will exceed $5 billion.
In August of 2007, Judge Saris initially certified the class of third-party payers, but not for damages, which last week's ruling includes. McKesson argued that third-party payers each have a unique contract with its PBMs, which allows for negotiation in drug pricing.
The lawsuit claims McKesson violated the federal Racketeer Influenced and Corrupt Organizations (RICO) act, and if found guilty, could be forced to pay treble damages under the RICO statute as well as under various consumer protection statutes.
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.
About Hagens Berman Sobol Shapiro
Hagens Berman Sobol Shapiro, is based in Seattle with offices in Chicago, Cambridge, Los Angeles, Phoenix and San Francisco. Since 1993, it has developed a nationally recognized practice in class-action and complex litigation. Among recent successes, HBSS has negotiated a $300 million settlement in the DRAM memory antitrust litigation, one of the largest anti-trust settlements in history; a $340 million recovery on behalf of Enron employees; a $150 million settlement involving charges of illegally inflated charges for the drug Lupron, and served as co-counsel on the Visa/Mastercard litigation which resulted in a $3 billion settlement, the largest anti-trust settlement to date. HBSS served as counsel in a $850 million Washington Public Power Supply settlement and represented Washington and 12 other states against the tobacco industry that resulted in the largest settlement in history. For a complete listing of HBSS cases, visit www.hbsslaw.com.