Drug Price-Fixing Scandal Ends with Help from New York City’s DC 37
October 24, 2006
October 24, 2006
A tentative legal settlement to end a prescription drug price-fixing scheme could cut the cost of drugs nationwide by billions of dollars annually. This is all thanks to a class-action lawsuit in which New York City’s DC 37 Health & Security Plan is a participant.
“The corrupt pricing practices uncovered in this lawsuit bled money from all union benefit plans and ultimately from our members’ pockets,” DC 37 Exec. Dir. Lillian Roberts said in a recent statement.
The plan provides prescription drugs and other health and welfare benefits to 300,000 AFSCME members, retirees, spouses and dependants. It is one of four union benefits funds named as plaintiffs in the lawsuit, brought by members (and some non-members) of thePrescription Access Litigation Project (PAL), an effort run by Boston-based Community Catalyst.
A subsidiary of The Hearst Corporation, called First DataBank Inc., is at the heart of this complex case. As the country’s most widely used publisher of prescription drug prices, the company helps establish the prices that health plans and state Medicaid programs pay to pharmacies.
The lawsuit alleges that – between 2002 and 2005 – First DataBank conspired to arbitrarily increase by 5 percent the markups between what pharmacies pay wholesalers for prescription drugs and the amount paid by health plans and insurers to reimburse pharmacies for those prescription drugs.
The groundbreaking settlement forces First DataBank to roll back the “average wholesale price” of nearly all brand-name drugs sold at retail pharmacies by 4 percent, for a projected savings nationwide of $4 billion dollars. The U.S. District Court in Massachusetts is expected to approve the deal in early 2007. The case against First DataBank’s partner in the alleged conspiracy, pharmaceutical distributor McKesson Corp., is still proceeding.
