First Databank agrees to settle price fixing suit

California, USA-based publisher First Databank, a unit of the Hearst Corporation, has agreed in principle to a settlement of a law suit which claimed that the company had colluded with San Francisco-headquartered drug wholesaler McKesson to raise the average wholesale prices of prescription drugs, which in turn would increase pharmacy profits for the latter firm. The settlement awaits approval by a US District Court judge.

The law suit originated when it emerged that McKeeson, since 2003, was the only wholesaler whose prices were utilized by First Databank to produce AWP tables. Previously, it was claimed that the publisher raised from 20% to 25% the mark-ups that wholesalers were making on their drug sales. The plaintifs, including several employers and unions, claimed that, from August 2001 to March 2005, they paid $7.0 billion more for their drugs, than under the previous calculation method.

According to the Wall Street Journal, the AWP is an anachronism which has its origins in the 1960s when consultants hired by MediCal (California's Medicaid program) estimated mark-ups at 20%. More recently, increasing competition in the pharmacy sector had tended to reduce the actual wholesalers' margin at about 2%-3%, whereas public sector payers were demanding 5%-15% discounts from the 20% AWP.