The Chicago settlement: who won the Rx price war?

Drug Store News, July 8, 1996 by Ken Rankin

It's no cure-all for the pharmaceutical industry discriminatory pricing practices that have weakened the competitive position of community pharmacy in the health care marketplace. But the plan approved by federal Judge Charles Kocoras to settle retail harmac 's class action price discrimination suit against the nation's leading drug manufacturers is drawing at least a measure of acceptance from representatives of the nation's drug chains and independents.

For his part, NACDS president Ron Ziegler said the class action agreement is a move in the right direction, albeit a modest one. "While the settlement by itself will not bring an end to discriminatory pricing" by the pharmaceutical industry against retail drug stores, "it is a small step forward," he said.

Across town at NARD, representatives of the nation's independent pharmacists were also giving the agreement a qualified thumbs up. "Although the new settlement offer is not perfect, it is an important first step toward eliminating the discriminatory pricing that has for so long disadvantaged our members in the marketplace," NARD executive vice president Charles West said.

Under the terms of the new class action agreement, 11 of the drug makers accused of illegally conspiring to drive up prices to retail pharmacies agreed to kick in $351 million in reparations to the 40,000 community pharmacists in the suit. But there's more to this deal than just money.

Unlike the original settlement plan that was shot down by U.S. District Judge Charles Kocoras earlier this year, the new proposal would specifically prohibit the manufacturer-defendants from refusing to grant prescription drug discounts to any retail pharmacy in the class "solely on the basis of its status as a retailer."

According to officials at NARD, the latest settlement proposal represents real "progress toward the elimination of multi-tier pricing" schemes and "phony classes of trade" distinctions used by the manufacturers to justify charging retail pharmacies more than competing managed care providers.

No access to deep discounts

Problem is, many retail pharmacies may find the settlement no help in securing access to the deep discounts that are often extended to HMOs and mail order pharmacies.

Rather than guaranteeing retailers the same prices on the same terms, the settlement merely assures them the "opportunity to negotiate' with manufacturers for "similar terms and conditions" available to "managed care entities."

Moreover, drug chains and independent pharmacies who are not participating in the class action suit are not even entitled to negotiate for these discounts, and existing deals offered to managed care providers are not covered by the settlement to begin with.

The kicker, though, is a seemingly boilerplate provision stating that nothing in the settlement shall prevent the 11 drug manufacturers from engaging in any pricing activity permitted under the Robinson-Patman anti-price discrimination law. In essence, this means that the only thing the manufacturers agreed to in the settlement is comply with the federal law against discriminatory pricing practices--something they say they've been doing all along.