Proposed drug price settlement not enough

12/8/2008

ALEXANDRIA, Va. —Pharmacy and retail groups have rejected a proposal from two drug data publishers to settle a class-action suit over prescription drug payment rates, asserting the settlement plan is inadequate.

In mid-November, the National Association of Chain Drug Stores and the Food Marketing Institute filed a brief and an economic report opposing the proposed amended First DataBank and Medi-Span class settlements in the U.S. District Court for the District of Massachusetts. Both groups asserted that the settlement plans would “substantially cut health plans’ drug payments, harming community pharmacies.”

At issue in the case was the rate at which union pension funds, teachers’ unions and other health-plan sponsors reimburse pharmacies for drugs dispensed to their members. Historically, that rate has been based on the average wholesale price of a drug, but the health-plan payers acting as plaintiffs in the suit charge that the AWP has risen to unrealistic levels that no longer reflect the real differences between what wholesalers pay manufacturers for a drug and the prices those wholesalers charge their retail pharmacy clients.

In their class-action filing, the plaintiffs asserted that health plans are paying too much for drugs, based on AWPs now averaging a 25 percent markup over the wholesale price of the drug. Originally named in the suit was First DataBank, which was accused of conspiring with McKesson Corp. to set AWP rates artificially high. But in May 2007, Medi-Span, a division of Wolters Kluwer Health, was named as a defendant in a similar class action involving the publication of AWPs.

On Jan. 22, federal Judge Patti Saris rejected the original settlements proposed by First DataBank and Medi-Span, in part because of a brief and economic analysis filed jointly by NACDS and FMI in objection to those proposed settlements, as well as opposition briefs filed by other plaintiffs. But both groups asserted that the amended settlements would still reduce the AWP benchmark by 4 percent for about 1,400 drug products. NACDS and FMI also pointed out in their brief that First DataBank and Medi-Span would reduce AWPs for thousands of other drug products, and will stop publishing AWPs altogether within two years, “seemingly ignoring the court’s rejection of that plan in their original proposed settlement.”

In short, “the proposed settlements fail to fairly compensate the class members and would unfairly penalize retail pharmacies,” both groups argued.

“These settlements disproportionately impact retail pharmacies,” said NACDS president and chief executive officer Steve Anderson. “Retail pharmacies would likely bear the brunt of these settlements. We urge the district court to carefully consider the amended proposal and its impact on the patients who rely on their community pharmacist.”

FMI president and chief executive officer Leslie Sarasin added that the proposal advanced by the two drug-price publishers “would provide inadequate benefits to the plaintiffs and, worse, undermine the ability of pharmacists to serve many families, especially in rural and innercity America.”

Opposition to the original settlement early this year was strong enough to draw together two other groups usually found on opposite sides of any issue: the National Community Pharmacists and the Pharmaceutical Care Management Association, representing the pharmacy benefit management industry. Both groups came out against the proposal.

NCPA said the AWP settlement would be “devastating” to independent pharmacies. “If the AWP is substantially reduced, independent pharmacies will be forced to dispense hundreds of branded drugs at a significant loss, driving hundreds of pharmacies out of business,” NCPA asserted in a court filing.

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