Idea #121 for June 19th, 2009: Caught Red Handed or Class Action Settlement for Drug Pricing Scheme

As part of a class action settlement, drug prices will be cut by 4% later this year and consumers may be reimbursed for their purchase of prescriptions over the last several years. The settlement comes after a lawsuit was filed against two drug price publishers and a drug wholesaler for conspiring to inflate prices of 400 drugs by about 5%, beginning in 2001. The illegal price alterations affected the Average Wholesale Price listings for the drugs, which caused insurance companies to overpay pharmacies. Overall, an estimated $2.9 billion was overpaid by insurers and patients for the drugs over the years.

Although patients with insurance were not directly affected by the pricing, it did result in inflated insurance premiums overall. Uninsured patients, on the other hand, were directly affected by the prices, and are entitled to reimbursement under the settlement. But receiving the payments requires that they’ve kept all receipts for the drug purchases. The 4% drug price reduction that will take effect in September will save insurers money, but whether that will be passed down to patients is unclear. It’s great that this scheme was uncovered, and that the parties involved will have to pay, but it makes one wonder how many other schemes like this have not been caught, and what price are we paying for them?

Read the story in the Wall Street Journal.