Pharmacists, Drug Firms Near Deal on Lawsuit

CHICAGO — Pharmacists who claimed drug makers were illegally denying them discounts enjoyed by health maintenance organizations are near a deal that answers their major complaints, according to court documents and people close to the case.

Attorneys for the 40,000 druggists have reached a revised settlement of their class-action lawsuit against major pharmaceutical manufacturers, the sources said Friday.

Unlike the agreement that was rejected by a judge last month, the revised deal would address future pricing practices. But as with the earlier deal, the drug companies would pay the pharmacies $408.9 million.

In court papers filed Friday, Michael Freed, lead attorney for the pharmacies, said the two sides are “completing a written agreement to reflect their understanding and . . . intend to resubmit the settlement for approval.”

During a series of quiet negotiations over the last several weeks, most of the 15 drug manufacturers who were sued by the pharmacists tentatively agreed “not to discriminate against pharmacies in pricing,” said a source who spoke Friday on condition of anonymity.

Attorneys involved in the settlement talks said the number of drug companies involved will not be final until next week.

Although details of the agreement were not immediately available, it apparently represents a significant new concession by the drug makers.

Under the previous settlement, the manufacturers would have agreed to pay the druggists but not to change their pricing policies.

The settlement talks represent an effort to end two years of litigation over the pharmacies’ contention that the manufacturers give unfair price breaks to HMOs, hospitals and mail-order houses.

Independent pharmacies say the practice is driving them out of business and that it sometimes forces those without health insurance coverage for drugs, particularly the elderly on Medicare, to pay inordinately high prices for prescriptions.

Drug makers had argued that the dual pricing structure was justified because HMOs and hospitals can control which drugs their patients use, offering the makers greater assurance of sales.

The original settlement of the suit was tentatively approved by U.S. District Judge Charles Kocoras in Chicago.

But at hearings in February, attorneys representing a number of pharmacies urged the judge to change his mind. Lawyers for chain stores also rejected the deal.

The settlement would have meant payments of $5,000 to $10,000 per druggist. Critics said they would rather address future pricing practices than get the money.

On April 4, Kocoras said plaintiffs should be allowed “the opportunity to earn the same or similar discounts” as HMOs and competitors.

A number of attorneys on both sides, including Freed, declined comment on the specifics of the deal.

However, the negotiators, who included representatives of the dissident pharmacies, tentatively agreed that the $408.9-million payment will stand, according to the source with knowledge of the talks.

Among the drug manufacturers involved in the lawsuit are Merck & Co., Glaxo-Wellcome, Ciba-Geigy, Abbott Laboratories and Bristol-Myers Squibb Co.

Kocoras must still approve any settlement. The next hearing in the case is scheduled for May 16.