Reuters is reporting that the state of Connecticut today followed San Francisco's lead in suing the McKesson Corp. over an alleged conspiracy to unfairly manipulate the price of prescription drugs. The Connecticut suit charges that McKesson, a multinational corporation based in San Francisco and ranked 18th on the Fortune 500 list, violated anti-racketeering laws by creating a scheme to artificially increase published figures related to what retail pharmacies pay to obtain prescription drugs from wholesalers like McKesson.
The alleged scheme involved the participation of a little-known company based in San Bruno called First DataBank, a subsidiary of media giant Hearst, owner of the San Francisco Chronicle. First DataBank maintains a sophisticated database of prescription drug prices that Medicaid administrators and private insurers use to determine what they'll pay a pharmacy retailer to cover the cost of your drugs after you've made the co-pay.
Because so many prescription drugs exist, First DataBank's figures are critical for understanding the true cost of pharmaceuticals as they move through market pipelines from the manufacturer to the wholesaler to the corner pharmacy. The suits allege that First DataBank and McKesson conspired to inflate those published prices so that everyone from Medi-Cal to Blue Cross paid far more to pharmacies than appropriate for the drugs. A big part of McKesson's business comes from chain pharmacies, and if they saw McKesson going to bat for them, the suits claim, they were likelier to maintain those business relationships instead of turning to a McKesson competitor like AmerisourceBergen or Cardinal Health. Yes this stuff sounds sleep-inducing, but there's a whole lot of money involved if City Attorney Dennis Herrera and others are right about this. Learn more about San Francisco's lawsuit.