Justices Refuse to Block Drug Industry Lawsuit

Drug manufacturers and wholesalers lost Supreme Court bids to block key aspects of a massive price-fixing lawsuit by retail pharmacies, setting the stage for a class-action trial in September.

The court, without comment, rejected separate appeals by manufacturers and wholesalers of a federal appeals court ruling issued in August.

Monday’s decision means 14 major drug companies face billions of dollars in claims by retail pharmacies, which say an industrywide conspiracy prevents them from taking advantage of discounts enjoyed by managed-care organizations and other pharmaceutical buyers.

“This is probably the largest antitrust case in history . . . and one with significant implications for the role of managed care in the nation’s health-care system,” the drug makers argued in a filing that urged the high court to hear the case.

However, the justices concluded that the case didn’t warrant their intervention, rebuffing arguments that the Chicago-based U.S. 7th Circuit Court of Appeals misapplied antitrust law.

The lawsuit charges drug makers and wholesalers with setting up a system that ensures that retail pharmacists pay top dollar for drugs, while more powerful purchasers receive discounts. Among other things, the pharmacists argue, the drug makers and wholesalers set up a “charge-back” system to lower prices for managed-care organizations, hospital chains and other institutional buyers.

Under that system, wholesalers sell at reduced prices to those purchasers, and drug makers reimburse the wholesalers for the discount. Retail pharmacists say they’re unfairly excluded from the system.

In their defense, drug makers cited a legal rule that allows price-fixing lawsuits only by direct purchasers of the product, not by buyers who acquire the item farther down the purchasing stream. They said most retail pharmacists in the case bought the drugs from the wholesalers, not the manufacturers.

The appeals court disagreed, saying indirect victims of price-fixing can charge the maker of a product with conspiring with the distributor.