McKesson Settles Lawsuit Alleging Conspiracy Against Rival Avatex

McKesson Corp. settled a lawsuit that alleged the drug distributor conspired to drive a unit of Avatex Corp.’s predecessor out of business.

Avatex disclosed settlement of the 1997 lawsuit in a Securities and Exchange Commission filing.

The Dallas-based company, previously known as FoxMeyer Health Corp., accused McKesson of helping to push FoxMeyer Drug Co. into bankruptcy so the larger firm could acquire it. McKesson bought the FoxMeyer unit in 1996.

Avatex will retain $2.5 million of the settlement after costs, according to the filing. Company officials wouldn’t give a gross figure for the settlement, citing a confidentiality agreement. Avatex had sought $400 million in compensatory damages and as much as $1 billion in punitive awards from McKesson and 12 drug makers that were alleged co-conspirators.

McKesson also settled a counterclaim against Avatex, its co-chief executives, Abbey Butler and Melvyn Estrin, and a former company officer.

“Both parties agreed to the settlement for economic reasons,” said Avatex Chief Financial Officer Grady Schleier.

The case, which had been set for trial in January in a state court in Dallas, revolved around the acquisition negotiations between FoxMeyer and McKesson. Avatex claims McKesson obtained confidential financial information during the talks and then had discussions with the drug makers, who in turn withdrew credit from FoxMeyer. McKesson alleged fraudulent misrepresentation in its counterclaim.

Avatex stock, which has plunged about 90% in six months, closed unchanged at 4 cents in over-the-counter trading. Shares of San Francisco-based McKesson rose 11 cents to $35.72 on the New York Stock Exchange.