Drug Firms to Pay Pharmacies $408 Million
A group of 15 major drug companies agreed Friday to pay more than $408 million to settle a class-action lawsuit charging that their two-tier pricing system discriminates against independent pharmacies.
The pharmacies charged that the drug companies, by denying them discounts offered to health management companies and others, put them at a competitive disadvantage even when the pharmacies bought drugs in bulk.
Attorneys for the pharmacies submitted the proposed settlement to Judge Charles P. Kocoras in U.S. District Court in Chicago, who scheduled a March 27 hearing on the merits of the settlement.
The judge can either reject the agreement or approve it all or in part. He can also work with the attorneys to modify parts of the settlement.
The drug companies did not agree to halt the two-tier pricing practice, said Mary Jane Fait, an attorney representing the companies.
None of the drug companies has admitted any wrongdoing in the case.
The final settlement amount is short of the approximately $600 million the druggists were hoping to obtain in a tentative accord reached last month. But it is more than five times larger than any known antitrust class-action settlement not preceded by a government investigation.
Neither of the federal government’s two antitrust agencies, the Justice Department and the Federal Trade Commission, has opened a formal investigation, although they followed developments in the dispute, according to government officials familiar with the case.
The settlement requires the drug companies to give the pharmacies both cash and coupons to purchase some drugs at reduced prices. In addition, 5% of the funds will be used to establish a foundation aimed at improving relations between the companies and the pharmacies.
The pharmacies will relinquish any claims they filed against the companies before Jan. 31.
“We think it’s better than just a cash settlement,” Fait said. Since the lawsuit was filed, several companies have voluntarily stopped the pricing approach that the pharmacies opposed, she said.
SmithKline Beecham, one of the companies that agreed to the settlement, said the company “has not engaged in any conspiracy to set prices. SB establishes its pharmaceutical prices unilaterally in response to changes occurring in the health-care marketplace.”
SmithKline agreed to settle in order to end the litigation with the majority of plaintiffs, the company said. None of the other drug companies was available for comment.
The retail pharmacists brought a class-action suit involving 30,000 plaintiffs and as many as 5,000 individual cases, complaining that the drug companies would not give them discounts--even when their ordering volume met or surpassed that of hospitals, pharmacy benefits managers, health-management companies and other bulk purchasers who got lower prices. The pharmacists contend the practice is discriminatory and an unreasonable restraint of trade under the Sherman Antitrust Act.
The companies argue that their discounts are justified because HMOs are able to specify which drugs their patients use, giving drug firms a greater assurance of sales.
