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Proposed Settlement Could Lower Prescription Drug Prices

Massachusetts court could approve class action agreement against wholesalers

September 23, 2008

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A Massachusetts federal court decision could result in lower prescription drug prices for consumers and third party payers.

The U.S.District Court for the District of Massachusetts has given preliminary approval to the settlement of a class action against publishers of wholesale drug prices, and certified a separate class action against McKesson Corporation, a large drug wholesaler. The related lawsuits concern the pricing of more than 450 brand-name drugs.

First Databank ("FDB") and Medi-Span publish data sometimes called the Average Wholesale Price (AWP) of drugs. The AWP is often used as a factor in determining drug prices and can be used as a factor in determining some co-payments for the brand-name drugs at issue in the lawsuits.

The FDB-McKesson lawsuit claims that FDB and McKesson wrongfully inflated the mark-up factor used to determine the AWP of certain drugs. The Medi-Span lawsuit claims that Medi-Span negligently published the AWP price of certain prescription drugs based on information received from FDB.

As a result, some consumers and insurers allegedly overpaid for hundreds of drugs. FDB, McKesson, and Medi-Span deny any wrongdoing.

FDB and Medi-Span have separately agreed to settle their lawsuits and will pay a total of $1.5 million into a settlement fund to benefit a class of consumers and TPPs such as insurance companies, union health and welfare plans, and self-insured employers.

The proposed settlements also require FDB and Medi-Span to lower the mark-up factor used to determine the AWP for the drugs at issue in the lawsuits. As a result, plaintiffs believe a substantial decrease in drug costs may occur in the future.

Included in the FDB/Medi-Span proposed Settlements are consumers and TPPs that paid or reimbursed for all or a percentage of the cost of prescription drugs based on the AWP published by FDB from January 2000 to the present or the AWP published by Medi-Span from December 2001 to the present.

Consumers who paid a flat or fixed co-payment for the drugs are not included. Some Pharmacy Benefit Managers may not be included.

The McKesson Class Action includes consumers who paid percentage co-payments and TPPs that reimbursed for certain brand-name prescription drugs based on AWP pricing between August 1, 2001 and March 15, 2005 and whose co-payments or reimbursements were based on the AWP published by FDB or Medi-Span for the drugs.

Consumers who paid a flat or fixed dollar co-payment or are uninsured are not included.

Consumers and TPPs may remain in the FDB/Medi-Span proposed settlements or the McKesson Class Action by doing nothing, but they will be bound by the Court's rulings. Consumers and TPPs may also exclude themselves and keep their rights to sue FDB/Medi-Span and/or McKesson. Consumers and TPPs must exclude themselves in writing or via email by November 15, 2008.

The Court will determine whether to approve the FDB/Medi-Span proposed settlements at a Fairness Hearing on December 17, 2008 at 3 PM. For the McKesson Class Action, a trial is now set for December 1, 2008.

"The FDB/Medi-Span proposed settlements and the McKesson class action will hopefully allow consumers and TPPs to experience a savings in the future due to the anticipated decrease in drug costs," said Steve W. Berman of Hagens Berman Sobol Shapiro LLP, Counsel for the Plaintiffs.

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