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Multi-Million Dollar Consumer Drug Scheme Alleged in Lawsuit Filed by Horne

PHOENIX (Wednesday, September 19, 2012) - The state of Arizona has filed a lawsuit against McKesson Corporation, the nation’s largest drug wholesaler, alleging the company violated Arizona’s Consumer Fraud Act by artificially inflating the prices of more than 400 brand-name prescription drugs, costing consumers millions of dollars, Attorney General Tom Horne announced today. 

Among the drugs that are alleged to have been marked-up inappropriately are: Allegra, Azmacort, Celebrex, Coumadin, Flonase, Lipitor, Neurontin, Nexium, Prevacid, and Valium. 

The complaint, filed September 14th in Maricopa County Superior Court, alleges that several of McKesson’s executives constructed a scheme beginning in 2000 to mark up the average wholesale price of many prescription drugs, resulting in higher prescription costs for Arizona businesses and consumers. McKesson distributes pharmaceuticals to retailers including Albertson’s, Costco, Safeway, Target, Wal-Mart and Walgreens. 

McKesson controls approximately one-third of the national wholesale drug distribution market. 

“The complaint states that McKesson’s illegal scheme inflated the prices of a broad range of pharmaceuticals costing Arizona consumers millions of dollars,” said Horne. “The prices of nearly all brand-name prescription drugs were inflated, including several of the most popular drugs on the market.” 

Horne added, “For example, in 2004 under this scheme, an additional McKesson markup of 5 percent for the drug Nexium could result in an added $100 million in profit based on $4 billion in sales of Nexium that year. Since this claim alleges markup irregularities on more than 400 drugs over multiple years, the consumer damages were enormous. We will ask the court to impose a penalty that recognizes the scope of the scheme.” 

Specifically, the suit alleges that McKesson raised the spread between the published average wholesale price and the actual acquisition costs in an effort to increase profits for its pharmacy customers. Those prices were passed along, the complaint alleges, to third-party payors and consumers. 

The complaint seeks civil penalties of up to $10,000 against McKesson for each violation of the Consumer Fraud Act, as well as restitution. 

A copy of the complaint is attached.