Independent drugstore owners rejoiced Thursday after a federal judge in Chicago rejected a proposed $408.9 million settlement from pharmaceutical manufacturers accused in a class-action suit of unfair pricing.
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U.S. District Judge Charles Kocoras said he ruled against the proposed settlement in part because the manufacturers had not addressed future pricing practices, and he called for a commitment on their part to fairness in future pricing.
The case centers on the pharmacies’ allegations that drugmakers’ pricing favors health maintenance organizations and mail-order drug suppliers over the independent pharmacies.
In his 16-page ruling, the judge said there was evidence the drug manufacturers sometimes refused to discount based on the status of a buyer and not the impact on market share.
Kocoras had given preliminary approval to the settlement in February, and 15 drug companies, including Abbott Laboratories and Eli Lilly and Co., had agreed to it but admitted no wrongdoing and had promised no change in behavior.
Last week, some of the plaintiffs–pharmacists and store owners–urged the judge not to endorse the proposed settlement, primarily because it would thwart future efforts to eliminate unfair pricing.
“The money is nothing,” said Howard Golin, co-owner with his brother of three Chicago-area drugstores. The settlement split among 30,000 pharmacies would have amounted to $5,000 to $10,000 for each, after legal fees.
“I could take the $5,000,” Golin said, “but in two or three years I’d have to put 40 people out of work because if things continue as they have been, all of the independents will be out of business soon.”
“David slew Goliath,” said Judi Lamble, partner in Chicago-based Robinson, Curley & Clayton, which represented Allan Fridkin, co-owner of Conney’s Pharmacy in Winnetka, who chimed in, “The little guy got his day.”
“Unless the pharmacists get a fair shot” in obtaining the same kind of discounts that HMOs get, Lamble said, the patients who are not in HMOs “aren’t getting a fair shot and in fact are being penalized.”
In Indianapolis, Lilly spokesman James Kappel said the drug company continues to maintain “that we have never been in collusion with any other pharmaceutical makers.”
Searle Laboratories of Skokie and Abbott of North Chicago did not return phone calls requesting their reactions.
Pharmacia & Upjohn Co. of Kalamazoo, Mich., which had not been among the settlement advocates, said it will continue as a defendant in the class-action suit, which goes to trial May 7.
John Rector, general counsel for the National Association of Retail Druggists, said another major aspect of the judge’s ruling involves confidentiality. If the pharmacists accepted the settlement, he said, “they would also have to relinquish their rights to future litigation under other laws and a section on confidentiality would have kept every single document buried. That means all of the information about the manufacturers’ pricing practices would have to be destroyed or returned to defendants.”
Rector said the ruling is particularly meaningful because “in a class-action suit, the judge is the bottom line and not the lawyers.”
Plaintiff’s attorney David Melnick of Melnick & Melnick in Milwaukee said, “What the judge is saying is that manufacturers cannot be allowed to continue to discriminate against retail pharmacists as they have in the past. Independent pharmacists are interested in change of practice rather than money.”
Melnick represents the Texas-based Pharmacy Freedom Fund, which has 3,300 members; the National Association of Retail Druggists, which includes 39,000 pharmacies; and individual pharmacists who are plaintiffs in the original class-action suit.