You probably didn’t see it in the news — since it got about 1/1000th of the coverage received by Sarah Palin spatting with David Letterman and Spencer and Heidi quitting “I’m a Celebrity … Get Me Out of Here” — but a noteworthy legal settlement occurred last week.
A major drug wholesaler, McKesson Corp., and two drug-price publishers have settled a class-action lawsuit accusing them of inflating drug prices. Here’s an explanation of what they did, according to the suit:
“Prescription drugs often are priced using certain benchmarks. The most common pricing benchmark is called the Average Wholesale Price (“AWP”). AWP is often used in determining how much insurance companies and other Third-Party Payors will reimburse for these prescription drugs and the co-payment price that some consumers pay for them. The lawsuit claims that two Defendants, McKesson Corporation (“McKesson”), a large drug wholesaler, and First DataBank (“FDB”), a publisher of drug data, wrongfully inflated the mark-up factor used by FDB to determine the AWP for certain prescription drugs (“Subject Drugs”). The lawsuit claims that, as a result, many drug purchasers overpaid for these drugs.”
The defendants have agreed to pay out $350 million to reimburse patients, insurers and employers. And — here’s the really interesting part — the court has ordered the prices of hundreds of brand-name drugs to be cut by about 4 percent, which, theoretically, could result in $1 billion in drug savings the first year alone.
But don’t count on dollars dropping from the sky in your direction. Analysts told the Wall Street Journal that drug pricing is so “opaque and complex, patients won’t likely get meaningful and long-lasting relief.”
I’m afraid I have to agree that most Americans will never see a dime of savings from this settlement. But let me break down this “opaque and complex” thing, because it’s really neither.
Many of these brand-name drugs have patents that give them pricing monopolies. They can throw a dart at the board and make the price whatever they want.
So, the court orders a 4 percent price cut? Whoa!
It’s not uncommon for drug makers to raise their prices by five times that in a year. What’s another 4 percent thrown in? Who would know? And who are we kidding?
Opaque, huh?
To find out if you are eligible to collect from the $350 million settlement fund, go here.
And for a complete list of the overpriced drugs, which include Lipitor, Lamisil, Monistat, Cipro, Ultracet, Zofran and many, many more, go here.
You are incorrect. The benefits of the increased WAC-to-AWP markup went to the pharmacies, not to drug makers.
Judge Saris was highly critical of pharmacies in her March decision. Check out the quote that I included in my blog post:
http://www.drugchannels.net/2009/03/farewell-awp.html
Regards,
Adam
Adam, your post is very informative, and I wish I’d read it first. I sometimes tend to fly off the handle when it comes to consumers getting ripped off by high drug prices. But you would probably agree that the AWP abuses are easier for pharmacies to achieve in a market with so little price transparency — a fact that benefits both pharmacies and drugmakers.