First DataBank Announces New Settlement in AWP Litigation

June 24, 2008

On June 2, 2008, First DataBank, a private publisher of prescription drug prices in the United States, announced a new proposed settlement in a class action suit alleging that the company conspired with a wholesaler to inflate the Average Wholesale Price (“AWP”) for certain prescription drugs. Among other prices, First Data Bank publishes Blue Book AWPs, which are widely used by Medicaid and private health insurers as a benchmark for reimbursement of prescription drugs. Under the terms of the new agreement, First DataBank will be required to adjust its reporting of Blue Book AWP for approximately 1400 National Drug Codes (“NDCs”) to 1.20 times the Wholesale Acquisition Cost (“WAC”) or Direct Price for those NDCs that are on a mark-up basis, and establish a centralized data repository to facilitate reasonable access to First DataBank material describing its drug price reporting practices. In addition, First DataBank agrees to pay $1 million and certain settlement-related expenses and fees.

On January 23, 2008, the Court issued an order denying approval of a previous proposed settlement, which would have required that First Databank cease publishing AWP data within two years after the Court’s approval of the settlement, as long as no competitor continues publishing similar AWP data. Because AWP is widely used by third-party payers as a drug reimbursement benchmark, the court was concerned that the original settlement had the potential to affect many providers that were not parties in the lawsuit.

Although the requirement that First DataBank cease publishing AWP was dropped in the new proposed settlement, First DataBank has announced, independent of the litigation, that it will discontinue publishing the Blue Book AWP data field for all drugs no later than two years after the changes noted above are implemented. First Databank also announced that it will apply the same 1.20 mark-up factor to all other NDCs whose Blue Book AWP is set based upon a markup to WAC or Direct Price in excess of 1.20. First DataBank will continue to publish other drug pricing information including WAC, Direct Price, Suggested Wholesale Price, Federal Upper Limits, as well as other clinical drug information.

The changes to the Blue Book AWP will become effective on or about 90 days after final court approval of the proposed settlement agreement. The proposed settlement agreement will require preliminary approval by the court, notification to the class members, and final approval by the court. Although the settlement does not require the termination of AWP, First DataBank’s decision to do so could result in significant changes in current reimbursement methodologies.

By Noelle C. Sitthikul

Categories: Reimbursement