McKesson Agrees to Settle Pricing Case for $350M

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November 21, 2008

McKesson Agrees to Settle Pricing Case for $350M

By MDM Staff

McKesson Corp., San Francisco, CA, has reached an agreement to settle damage claims of inflated prices on prescription drugs paid by private health-benefit plans and individuals. The company has agreed to pay $350 million. With the settlement, the drug distributor continues to deny the claims made in the lawsuit.

The terms are subject to final court approval.

The company will also record a reserve for outstanding and expected future claims by public entities, which is estimated to be $143 million.

“As we have consistently stated, we believe the plaintiffs’ allegations are without merit, and that McKesson adhered to all applicable laws,” said John H. Hammergren, CEO. “Yet when faced with the inherent uncertainty of this litigation, we determined that entering into the settlement agreement was in the best interest of our shareholders, customers, suppliers and employees.”

McKesson has more than $100 billion in annual revenues.

The lawsuit alleged that McKesson – one of the largest pharmaceutical distributors in North America – entered into a secret agreement to artificially inflate the reported average wholesale price of thousands of drugs, a benchmark used by Medicaid and insurance plans to determine payment to pharmacies.

According to the complaint, beginning in late 2001, McKesson and First Databank, a publishing company, reached an agreement on how the AWP would be set for brand-name drugs, and in doing so, raised the spread between the published AWP and the actual acquisition costs in an effort to increase profits.

First Databank has already reached a settlement with the plaintiffs including a rollback of AWP prices and an agreement to stop publishing the data.

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