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Firm to Phase Out Wholesale Drug Price List

October 07, 2006|From the Associated Press

A publisher of prescription drug prices has agreed to eventually stop putting out its controversial list of wholesale medicine prices, which numerous critics have blamed for driving up drug costs.

The agreement came as part of a settlement of a lawsuit that alleged the publisher had conspired to increase markups.

The plaintiffs said the settlement, filed in U.S. District Court in Massachusetts late Thursday and still awaiting a judge's approval, would save health plans billions of dollars. In a statement, the publisher, First DataBank, said that it had done nothing wrong and that it was not paying any damages to the plaintiffs.

First DataBank, a unit of Hearst Corp., produces a list of the average wholesale price of numerous drugs. The suit alleged that it conspired with drug wholesaler McKesson Corp. to manipulate the price of medicines to benefit that company's customers. McKesson is not part of the settlement, reached in a class-action suit brought by the New England Carpenters Health Benefits Fund and the American Federation of State, County and Municipal Employees District Council 27 Health and Security Plan.

In a statement, McKesson said it did not conspire with First DataBank to raise the published average wholesale prices of drugs.

McKesson shares fell $2.64, or 5%, to $50.54 on Friday.

Deutsche Bank analyst Barbara Ryan said she believed that the stock fell because a Wall Street Journal article, which first reported the settlement, implied that the company had engaged in illegal activity. She said McKesson's profit was not directly affected by a drug's average wholesale price.

Still, stock prices of other wholesalers also fell. Amerisourcebergen Corp. shares slipped 78 cents, or nearly 1.7%, to $45.95, and Cardinal Health Inc. stock dropped $2.36, or 3.6%, to $64.02.

Ryan said drug makers would not be affected by any changes to average wholesale prices because they are set after pharmaceutical companies sell their products to wholesalers. She maintains that companies such as drugstores and pharmacy benefit managers, which make money on the spread between what they pay for drugs and the price at which they sell them, will be hurt if changes to average wholesale prices decrease the spread.

CVS Corp. shares fell $1.61, or 5.2%, to $29.32 and Walgreen Co. stock dropped 73 cents, or 1.7%, to $42.66.

Shares of pharmacy benefit manager MedcoHealth Solutions Inc. slipped $2.62, or 4.4%, to $57.11, and Caremark Rx Inc. stock decreased $2.55, or 4.6%, to $53.40. Express Scripts Inc. shares fell $3.50, or 4.5%, to $73.92.

First DataBank said it would phase out listing average wholesale prices within two years of the settlement's approval.

First DataBank's statement said that it reported only information collected from third parties.

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