McKesson to pay $151M to settle drug-pricing suit

SAN FRANCISCO (AP) - Twenty-nine states have reached a $151 million settlement in a lawsuit alleging one of the country's largest drug wholesalers inflated prices for hundreds of prescription drugs, officials said Friday.

The agreement with San Francisco-based McKesson Corp. settles allegations that the company deliberately inflated drug prices by as much as 25 percent, causing the states' Medicaid programs to overpay millions of dollars in reimbursements.

An investigation by state and federal agencies found that McKesson inflated the prices of more than 1,400 brand-name drugs, including these commonly prescribed medications such as Adderall, Allegra, Ambien, Celexa, Lipitor, Neurontin, Prevacid, Prozac and Ritalin, officials said.

California, where the alleged overpayments went on from August 2001 to December 2009, will receive about $24 million of the settlement, said state Attorney General Kamala Harris.

"In these difficult budget times, it is crucial that California's scarce public resources support the urgent needs of our state," Harris said in a statement. "We cannot allow dollars meant for patients to be diverted to inflate corporate profits."

McKesson representative Kris Fortner said the claims against the company are without merit, but "given the inherent uncertainty of litigation, we determined that this settlement was in the best interest of our employees, customers, suppliers and shareholders."

"We did not manipulate drug prices and did not violate any laws," Fortner said.

The settlement stems from a 2005 whistleblower lawsuit that was filed under federal and states' false claims statutes. It alleged that McKesson inflated average wholesale prices reported to First Data Bank, which many state Medicaid programs use to set payment rates for pharmaceutical reimbursement.

The federal government settled its portion of the lawsuit for more than $187 million in April.

New York will receive $64 million in restitution as part of the settlement announced Friday, said state Attorney General Eric Schneiderman.

"Pharmaceutical distribution companies are not above the law. This settlement holds McKesson accountable for attempting to make millions of dollars in illegal profits," Schneiderman said.

Besides California and New York, states covered in the settlement include Arkansas, Colorado, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Maine, Michigan, Minnesota, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Pennsylvania, South Dakota, Tennessee, Texas, Vermont, Washington, West Virginia and Wyoming. The District of Columbia also was covered.