McKesson Settles Class Action RICO Suit For $350 Million
McKesson Corp., the nation’s largest drug distributor, has agreed to pay $350 million to settle a class action suit alleging it fraudulently hiked up the price of more than 400 medications. A class of consumers and health and welfare funds had filed suit in 2005 against the company alleging violations of the Racketeer Influenced and Corrupt Organizations Act for allegedly falsely inflating the average wholesale price (AWP) of a number of America’s most popular prescription medications.
Those medications included allergy drug Allegra, arthritis/pain medication Celebrex, asthma drug Flonase and cholesterol medication Lipitor, which, according to Intercontinental Marketing Services, was the world’s top-selling drug as of September. The Plaintiffs alleged in their second amended complaint that McKesson conspired with First DataBank, an electronic drug data publisher, to deceitfully increase the AWP, which is widely relied upon by “consumers, health and welfare plans, health insurers and other end payors for prescription drugs” as a pricing standard.
According to the complaint, McKesson and First DataBank devised a scheme to increase “the spread” between medications’ wholesale acquisition cost (WAC) which is the price retailers pay for drugs, and the AWP, the price at which retailers sell drugs to consumers. The complaint alleged that in late 2001 or early 2002 First DataBank, which gets the WAC and AWP information from drug manufacturers, reached an agreement with McKesson in which First DataBank would rely solely on McKesson’s WAC-to-AWP spread.
Source: The Legal Intelligencer
