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Court denies manufacturers’ argument that "average wholesale price" should not be read literally

Pharma Compliance Alert, November 8, 2006

A U.S. District Court in Boston has rejected an argument, made by several drug manufacturers, that, for the purposes of reporting drug prices to Medicare, average wholesale price is merely a term of art for a benchmark or reference price in negotiations.

"The plain language meaning of the regulatory and statutory term 'average wholesale price' is a straightforward exercise that begins with the dictionary," U.S. District Judge Patti Saris states in a ruling denying the manufacturers' motion to dismiss a class action suit alleging that the companies defrauded consumers by misrepresenting the average wholesale price of certain drugs.

The ruling came four days before the trial was set to begin on November 6. The plaintiffs in the class action include individuals, third-party payers such as union healthcare funds, and non-profits. Defendants in the case are AstraZeneca, Johnson & Johnson, Schering-Plough and Bristol-Myers Squibb.

GlaxoSmithKline was part of the litigation until it reached a $70 million settlement with the plaintiffs in August. Under that agreement, 30% of the settlement will go to individuals who incurred co-payments based on the reported average wholesale price for a list of specific Medicare Part B drugs. The rest of the money goes to third-party payers.

The ruling and other documents related to the case are available on the website of the plaintiffs' attorneys, Hagens, Berman, Sobol, Shapiro (HBSS).

The firm also recently settled with First Data Bank, a primary publisher of pharmaceutical average wholesale price data. The settlement requires First Data Bank to adjust the wholesale acquisition cost to average wholesale price mark-up on 95% of the drugs sold in the U.S.

According to the HBSS, First Data Bank's adjusted mark-up on pharmaceutical products will not exceed 1.20, resulting in a 4% price reduction in all retail drugs. FDB has also agreed to stop publishing the AWP list for pharmaceutical products after a two year notice period.

HBSS estimates the adjustment will save Americans $4 billion in 2007 alone. Of that, $3.3 billion will go to third party payers, while approximately $400 million will go to the uninsured, according to the firm.

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