$4 Billion, Says DC 37
Pricing Settlement To Cut Drug Costs

By HOWARD MEGDAL

A settlement of a lawsuit brought by District Council 37 and other unions against a company which lists prescription drug prices will save consumers $4 billion next year, according to DC 37.

LILLIAN ROBERTS: 'Members were bled.'

The suit had charged that First Databank, which publishes a list of drug prices called "Average Wholesale Price," had been artificially inflating the costs to increase profits for drug companies.

Five-Percent Refund

The settlement calls for a five-percent rollback in AWP, though First Databank did not acknowledge wrongdoing in the agreement. First Databank also agreed to stop publishing the AWP, which is used by many within the industry as a guideline, within two years.

"We're proud to have taken a lead role in protecting our members' vital prescription drug benefit," DC 37 Executive Director Lillian Roberts said in a statement. "The corrupt pricing practices uncovered in this lawsuit bled money from all union benefit plans and ultimately from our members' pockets."

First Databank disputed Ms. Roberts's assertion, with President Donald M. Nielsen saying in a statement that "First DataBank firmly maintains that it has engaged in no wrongdoing with respect to any and all claims alleged in the litigation and First DataBank is not paying any damages to the members of the plaintiff class."

First Databank has said that the price guidelines stem from a national survey of drug distributors to pharmacies. But a manager at First Databank said that the survey involved only one wholesaler, McKeeson Corp.

$7 Million Jump

A 20-percent markup between what drug wholesalers paid manufacturers and what they charged retail pharmacies had been the industry standard for decades, but in 2002 First Databank changed that benchmark to 25 percent. The lawsuit's plaintiffs, which also included the New England Carpenters Health Benefits Fund, alleged that the change cost consumers an additional $7 billion between August 2001 and March 2005.

In a January 2002 internal e-mail, a McKeeson executive touted his company's role in "raising the AWP spreads."

Ms. Roberts did not rule out further litigation, should the settlement fail to end unwarranted increases in drug prices.

"We trust that those entities that are involved in the production, pricing and distribution of prescription drugs will heed our efforts in this case and cease their upward manipulation of the price we all pay for prescription drugs," she said. "But, if they don't stop their unlawful greed, we'll be seeing them in the courts."