A tough pill to swallow - Page 2

How a drug-data publisher owned by media giant Hearst inflated the cost of medicine

What remained unclear at press time was why First DataBank would choose to survey only McKesson or how it might have benefited from the decision.
The Journal notes the pharmacies were the only ones that stood to profit from the standardized markups, not McKesson directly. But internal McKesson e-mails show the company not only was aware of its impact on First DataBank's published figures but hoped pharmacies would see McKesson working in their best interests — a marketing scheme, if you will.
An e-mail from one McKesson product manager gleefully exclaims that the profit for pharmacies dispensing a bottle of the cholesterol drug Lipitor leaped from $6.86 to $17.18.
First DataBank admitted no wrongdoing and is not paying money to the plaintiffs of the Boston settlement. The company was founded in 1977, and Hearst purchased it in 1980. Federal records show that in 1998, Hearst bought a $38 million company that owned one of First DataBank's only real competitors, Medi-Span.
A later investigation by the Federal Trade Commission revealed that Hearst had failed to turn over key documents to the Justice Department's antitrust division during the sale. As a result the feds slapped Hearst with a $4 million fine in 2001, at that time the largest premerger antitrust penalty in US history. The FTC also belatedly concluded that Hearst's ownership of Medi-Span gave it a monopoly over the drug database market and not only required that Hearst give up Medi-Span but forced the company to disgorge $19 million in profits generated from the acquisition.
Hearst spokesperson Paul Luthringer directed us to a bare-bones statement when the Guardian called with questions about the Boston suit. "The allegations made in these actions have raised concerns with respect to the integrity of the pricing information that is provided to First DataBank for purposes of publishing [the average wholesale price]," the release states. "In light of these concerns, First DataBank has determined to make certain changes in its drug pricing reporting practices."
Climbing drug costs can't be attributed mainly to First DataBank or McKesson, of course. In fact, recent investigations and civil suits spearheaded to find out why prices have skyrocketed have focused on the manufacturers. During those inquiries First DataBank has been hit with dozens of subpoenas nationwide requesting company records and testimony, according to San Mateo Superior Court records. Many of those cases are still ongoing.
Attorneys for the plaintiffs in Boston who made McKesson and First DataBank defendants in the summer of 2005 declined to comment. McKesson also has remained tight-lipped since the Journal story was published. Spokesperson James Larkin said the company would not answer questions beyond a prepared statement.
"If First DataBank decided to survey McKesson only, it did so without telling McKesson," the statement reads. "In fact, First DataBank has affirmed in an earlier lawsuit involving other parties that it never told McKesson that at times McKesson was the only wholesaler being surveyed." SFBG
Here are links to key documents, including federal court records of the Oct. 6 Boston settlement with the Hearst-owned First DataBank (www.hagens-berman.com/first_data_bank_settlement.htm), the Justice Department's antitrust fine of Hearst in 200l (www.usdoj.gov/atr/cases/indx330.htm), and the Federal Trade Commission decision requiring Hearst to give up its monopolistic subsidiary, Medi-Span (www.ftc.gov/bc/healthcare/antitrust/commissionactions.htm).

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