Lawsuits & Judgments

A Boston judge has certified a class action lawsuit against McKesson Corporation, the largest drug distributor in North America. The Lawsuit, which was filed by the Seattle based law firm of Hagens Berman Sobol Shapiro back in in October of 2006, was filed on behalf of consumers and various third part insurance providers, was finally certified yesterday, August 29th.

The suit alleges that McKesson entered into “secret agreements” to inflate the reported average wholesale price (the AWP) of many, possibly thousands, of the drugs it distributed. The average wholesale price is used by Medicaid and insurance plans to determine what the payment will be to pharmacies and by causing the AWP to be inflated, McKesson was able to increase the profit it made on the drug at the expense of consumers and third party insurance companies.

According to the announcement posted on the Hagens Berman Sobol Shapiro website, the wrongdoing began in 2001when McKesson and publisher of drug industry information, First Databank, reached an agreement to set the AWP for brand name drugs. The result was a larger gap between the reported wholesale price of the drugs and the actual cost paid, which resulted in a higher profit margin for the company. Analysis of pricing information showed that as a result, companies who had been using a 20% mark up in 2000 were using a 95% markup in 2002.

According to Steve Berman, HBSS managing partner and co-lead attorney, McKesson’s intentions were obvious:

It is clear to us that McKesson’s motivation was to extract higher profits on the backs of health care consumers, many of whom are stretched to the economic breaking point…We believe that the damages incurred by healthcare consumers and third party payers could range in the billions of dollars.

Judge Pati Saris certified the class of the case to include millions of health care consumers who made co payments on what may have been artificially inflated prices.

McKesson also face charges under the Racketeer Influenced and Corrupt Organizations (RICO) act as well as California consumer protection laws.