McKesson settles AWP class action

McKesson has agreed to pay $350 million to settle allegations that it engaged in average wholesale price fixing with First Databank, an AWP publisher. The AWP is traditionally used to set the price that health plans pay prescription benefit managers for prescription drugs. According to McKesson’s press release,

The settlement terms, which are subject to final court approval, include an express denial of liability of any kind. The company will also record a reserve for outstanding and expected future AWP-related claims by public entities, which is currently 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, chairman and chief executive officer. “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.”The settlement will now be submitted to the court for preliminary approval, followed by notice to the class and a final approval hearing, which has not yet been scheduled.

The plaintiffs class counsel also have entered into a proposed class settlement with First Databank. That settlement in stark contrast provides for a $1 million payout and unnecessary disruption of the PBM contracts with health plans (because the underlying problem which arose seven years ago has been resolved contractually.) The court holds a fairness hearing on the First Databank settlement next month.