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Life Health > Health Insurance

Case Could Affect Drug Reimbursement Rates

By Staff Writer

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A proposed lawsuit settlement could change a key source of prescription price data.

First DataBank Inc., San Bruno, Calif., a unit of the Hearst Corp., New York, that publishes the Essential Directory of Pharmaceuticals, or “blue book,” is one of 3 major sources of average wholesale price information for the U.S. prescription drug market.

First DataBank has agreed to settle a class-action suit filed in the U.S. District Court in Boston by reducing the markup it uses to generate blue book average wholesale price data to 20% of the prices obtained from manufacturer surveys, from 25%, within 60 days after the settlement is approved.

First DataBank also has agreed that it will get out of the business of publishing “blue book average wholesale price” information within 2 years after the settlement is approved. But First DataBank could stay in the blue book AWP data business if a publishing competitor starts disseminating “electronically integrateable” blue book average wholesale price data or other similar drug pricing benchmark data.

First DataBank has agreed to help the plaintiffs pay their legal fees, but it is not paying any damages, and it says it believes it has “valid and complete defenses” against the plaintiffs’ claims.

First DataBank is settling the case, New England Carpenters Health Benefits Fund et al. vs. First DataBank Inc. and McKesson Corp. solely to avoid further expense and inconvenience, according to the proposed settlement agreement.

The lead attorneys in the case are lawyers at Hagens Berman Sobol Shapiro L.L.P., Seattle.

First DataBank competes in the drug price data market against Thomson Medical Economics, a unit of Thomson Corp., Stamford, Conn., and Facts & Comparisons Inc., a unit of Lippincott Williams & Wilkins Inc., Baltimore.

The proposed First DataBank settlement would not affect the plaintiffs’ efforts to sue McKesson, Corp., San Francisco, and it would not affect efforts by the plaintiffs and their lawyers to sue drug manufacturers in connection with allegations that the manufacturers have used a variety of tactics to inflate prescription drug prices, according to the proposed settlement.

The plaintiffs say McKesson was the only company surveyed for the First DataBank AWP blue book in some years, and that it was responsible for increasing the usual AWP markup to 25%, from 20%, in 2002.

One provision of the proposed First DataBank settlement calls for First DataBank to make its employees and officers available for testimony in the case against McKesson and in In Re Pharmaceutical Average Wholesale Price Litigation, a collection of other average wholesale price cases now consolidated in Boston.

First DataBank also would make employees and officers available to testify in average wholesale price cases brought by state attorneys general.

Community Catalyst, Boston, a consumer group, helped organize the drug pricing litigation.

The drugs included in the First DataBank blue book account for about 95% of U.S. retail prescription drug sales, and many health plans use contracts that peg the actual prices they pay for drugs to commercial AWP data, Community Catalyst says.

McKesson says in a statement that it believes the claims against it have no merit.

“We will defend ourselves vigorously,” McKesson says.

“McKesson does not set AWP,” McKesson adds. “First DataBank sets AWP. In the period covered by the litigation, McKesson believed it was one of 3 national wholesalers that First DataBank surveyed to derive its published average wholesale prices. If First DataBank decided to survey McKesson only, it did so without telling McKesson. In fact, First DataBank has affirmed in an earlier lawsuit involving other parties that it never told McKesson that at times McKesson was the only wholesaler being surveyed.”

CVS Corp., Woonsocket, R.I., a large retail pharmacy chain, says in a statement of its own that it believes First DataBank is the largest supplier of AWP data.

“Under most commercial agreements, retail pharmacies are reimbursed for prescription drugs based on a formula designed to provide us with a reasonable return,” CVS says. “That formula is based on the AWP for a particular drug minus a negotiated discount plus a negotiated dispensing fee. These negotiations occur on an ongoing basis. Over time, as AWPs have risen, the negotiated discounts have also widened.”

If AWPs suddenly fell, “obviously we would renegotiate the discount or dispensing fee,” CVS says. “Virtually all of our commercial agreements are ‘at-will’ agreements, which can be renegotiated freely.”

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