NACDS hails court’s decision to block AWP pricing settlement

ALEXANDRIA, Va. Not so fast.

That was the message a federal judge had yesterday in response to a proposed settlement of a class-action suit brought by a group of employers, unions and other health plan payers against drug-data publishers First DataBank and Medi-Span. Citing concerns over fairness to thousands of retail pharmacies affected by the outcome of the case, Judge Patti Saris of the U.S. District Court for the District of Massachusetts rejected the proposed settlements in part because of opposition from the National Association of Chain Drug Stores, the Food Marketing Institute and other pharmacy groups.

At issue in the case was the rate at which government and private health plan sponsors reimburse pharmacies for drugs dispensed to their members. Historically, that rate has been based on the average wholesale price of a drug, but plaintiffs in the suit charge that the AWP has risen to unrealistic levels that no longer reflect the real differences between what wholesalers pay manufacturers for a drug, and the prices those wholesalers charge their retail pharmacy clients.

In their class action filing, the plaintiffs asserted that health plans are paying too much for drugs, based on AWPs now averaging a 25 percent markup over the wholesale price of the drug. Originally named in the suit was First DataBank, but in May 2007, Medi-Span, a division of Wolters Kluwer Health, was named as a defendant in a similar class action involving the publication of AWP.

“Subsequently, the United States District Court, District of Massachusetts granted preliminary approval to settlements for both First DataBank and Medi-Span,” noted First DataBank president Donald Nielsen. “The court also issued an order directing notice to the class members, and scheduled a fairness hearing for Jan. 22, 2008, regarding final approval of the settlement.”

In agreeing to settle the case, the two drug data publishers agreed to reduce the average wholesale price AWP to 120 percent of wholesale acquisition cost, and to stop publishing AWP prices within two years as a prescription drug pricing benchmark.

NACDS and FMI argued that the proposed settlements failed to fairly compensate the class members, were based on faulty economic analysis, and would unfairly hurt retail pharmacies. “Judge Saris was clearly disturbed by the potential for the proposed settlement to disproportionately impact retail pharmacies,” noted NACDS in a statement late this afternoon.

“NACDS appreciates Judge Saris’ recognition that community pharmacy should not be treated unfairly by the First DataBank and Medi-Span proposed settlements,” said NACDS president and chief executive officer Steve Anderson. “We will continue to push for the fair treatment of community pharmacy in all branches of the government.”

In opposing the agreement, NACDS and FMI filed a court brief and an economic analysis that detailed the ways in which the cost savings and impact of the settlements were based on “inaccurate economic analysis,” according to NACDS. In addition, NACDS and FMI testified that, under the proposed settlements, the settlement class would walk away empty-handed, and innocent non-parties (i.e., pharmacy operators) would bear “the economic brunt of the settlement.”

Opposition to the settlement also came from two other groups usually found on opposite sides of any issue: the National Community Pharmacists and the Pharmaceutical Care Management Association, representing the pharmacy benefit management industry.

According to NACDS, the parties in the lawsuit will consider the issues raised by Judge Saris and report back to the court in two weeks on an alternative approach to settlement “that takes the concerns she raised during the hearing into consideration.”