US District Court certifies class-action lawsuit against McKesson for drug price manipulation

Today a United States District Court judge certified a nationwide, class-action lawsuit against McKesson Corporation (NYSE:MCK) on behalf of municipalities claiming McKesson engaged in a scheme to inflate fraudulently the price of more than 400 brand-name prescription drugs, including blockbusters such as Prozac, Lipitor, Zocor and Vioxx.

The lawsuit, filed by Seattle-based Hagens Berman Sobol Shapiro, comes on the heels of a $350 million settlement McKesson paid to consumers and third-party payors who made similar charges. That settlement was reached in 2008 and was given final approval by United States District Court Judge Patti B. Saris on August 3, 2009.

This class action represents cities, counties and other municipalities that overpaid for medications because of the price inflation scheme outlined in the complaint, originally filed on August 7, 2008, in U.S. District Court for the District of Massachusetts in Boston.

"Since uncovering McKesson's AWP scheme, we have been fighting the battle to return money to victims of the company's conduct for years. We are still amazed at the depth and breadth of the scheme's reach," said Steve Berman, Hagens Berman managing partner and lead attorney in the In re McKesson Governmental Entities AWP Litigation. "We've successfully returned $350 million to consumers and other purchasers, and we anticipate this case will provide economic justice for thousands of other payors who -- especially in a time of tight government budget -- lack the resources to seek recourse from McKesson individually."

Berman calculates that the damages of this case could total hundreds of millions of dollars, which are subject to trebling under the federal RICO statutes.

The suit claims McKesson conspired to rig the average wholesale price (AWP) of brand-name drugs while raising the spread between the published AWP and the wholesale acquisition cost from 20 to 25 percent in an effort to increase profits by currying favor with its large retail pharmacy clients. The Complaint alleges that McKesson cleverly concealed the scheme so that payors like municipalities would wrongfully attribute the increases to drug manufacturers.

In an earlier ruling in the consumer case, 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.

Judge Saris has certified the case for liability for those non-state and non-federal government entities that paid inflated rates for drugs from August 1, 2001, to June 2, 2005, as a result of the AWP scheme.

Municipalities pay for drugs used by their employees enrolled in self-insured health plans, and in some cases administer community clinics and other non-Medicaid or Medicare public assistance programs.