McKesson Corporation : McKesson Agrees To Settle Drug Mark-Up Claims For $190 Million
04/26/2012| 01:28pm US/Eastern
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--Justice Department alleged McKesson inflated drug prices
--Settlement part of about $2 billion federal and state governments received in similar cases
--McKesson calls claims "without merit," but opts to settle due to "uncertainty of litigation"
(Updates with McKesson statement, new stock price.)
McKesson Corp. (MCK) agreed to pay the U.S. government more than $190 million to settle claims it inflated prescription-drug information, causing Medicaid to overpay for certain drugs, the Justice Department said.
The government alleges that McKesson, a drug distributor, reported inflated pricing data on a wide variety of brand-name drugs to First DataBank, a publisher of drug prices that are used by most state Medicaid programs to set payments rates for pharmaceuticals. The actions may have violated the False Claims Act, the department said.
McKesson denied any liability, saying the claims against it were "without merit." It added that it didn't violate any laws or manipulate drug prices.
"However," the company continued, "when we weighed our conviction that we did not violate any laws against the inherent uncertainty of litigation, we determined that this settlement was in the best interest of our employees, customers, suppliers and shareholders."
In addition to the $190 million--which represents the $187 million settlement and interest--the Justice Department suggested that McKesson may still face claims from states involving alleged Medicaid overpayment, which would be negotiated separately from the department's settlement.
To date, federal and state governments have recovered more than $2 billion from drug manufacturers that were alleged to have reported inflated average wholesale price information to publishers of drug prices.
McKesson has continued to see strong performance in its U.S. distribution business. Rising sales of higher-margin products and services, including generic products, have also helped results.
In January, the company reported $300 million in fiscal third-quarter earnings, up 94% on higher revenue and fewer charges from the year-ago period.
Shares were up 30 cents at $91.68. The stock is up 18% so far this year.
-By Ben Fox Rubin, Dow Jones Newswires; 212-416-3108; ben.rubin@dowjones.com
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