Retail pharmacies are entitled to show they deserve similar drug prices as managed-care companies, a federal judge declared last week in rejecting a $408 million settlement of a suit between drugstores and drugmakers.
U.S. District Judge Charles Kocoras in Chicago made the statement in a 16-page ruling in which he rejected a proposed partial settlement of the class-action suit. Reversing a preliminary approval, Kocoras said the settlement was unfair to pharmacies because it wouldn't force drugmakers to end a two-tiered pricing system.
Thousands of retail pharmacies say drug manufacturers illegally charge them more than managed-care companies and hospitals. The class-action suit is one of two cases before Kocoras in U.S. District Court in Chicago. The second suit charges price discrimination in addition to price-fixing.
In response to the suits, the Federal Trade Commission is investigating the drug pricing of 22 manufacturers, most of whom are defendants.
Hospitals worry that their own drug prices will rise if manufacturers are found guilty of price discrimination and forced to lower retail prices (Oct. 9, 1995, p. 84). Several hospital groups considered the proposed settlement unimportant for the same reason Kocoras ruled it unfair: It didn't prohibit dual pricing in the future.
An appropriate settlement would require manufacturers' commitment to not deny discounts solely because of retail status, Kocoras wrote. It also would require them to offer similar discounts to retail pharmacies if they demonstrate a similar ability to affect market share as managed-care companies, he said.
"There is evidence in this record that the refusal to discount is sometimes based on the status of the purchaser and irrespective of that purchaser's ability to affect market share," Kocoras said. "In these circumstances, the retail pharmacy is denied...the opportunity to compete effectively in the marketplace with managed-care providers. The denial of the discount in these circumstances is not only manifestly unfair, it is also illegal."
A tentative trial date for the suit is set for May 7.