• National Ass'n of Chain Drug Stores v. New England Carpenters Health Benefits Fund No. 09-1577 (1st Cir. Sep. 3, 2009)
  • October 2, 2009 | Authors: Arthur N. Lerner; Bruce O. Tavel; Matthew T. Fornataro
  • Law Firm: Crowell & Moring LLP - Washington Office
  • The First Circuit upheld a district court's approval of two settlements involving class action suits brought by purchasers of prescription drugs against First DataBank and Medi-Span ("Defendants"). In the first suit, the class alleged that First DataBank violated RICO by inflating AWP whereas in the second suit, the class alleged negligence for similar conduct. The Class and the Parties agreed to proposed settlements. The primary provision of the proposed settlements required the Defendants to "rollback" their published AWP figures for all drug products with a mark-up higher than 1.2 down to a 1.2 mark-up. The district court preliminarily approved the proposed settlements. As a result of objections to the proposed hearings, primarily from pharmacy interests worried that the rollback would reduce payments they receive from third party payers and PBMs, the settlements were amended. However, the rollback provision remained the same.

    The district court issued a final order and judgment certifying the class and approving the settlements. Parties representing the pharmacy interests and PBMs filed appeals. The issues under appeal included (1) which parties could appeal the judgment, (2) whether the judgment operates against pharmacies that were not parties to the case and therefore violates their rights to due process and offends Federal Rule of Civil Procedure 19 and (3) whether the district court correctly concluded that the settlements were "fair, reasonable, and adequate."

    With regard to the parties entitled to appeal the judgment, the Court ruled that (1) the National Association of Chain Drug Stores, the Food Marketing Institute, and DeVille Pharmacies were entities within the class definition, did not opt out of the class and were therefore entitled to appeal, (2) the Long-Term Care Pharmacy Alliance and the American Society of Consultant Pharmacists, non-class members who moved to intervene in the district court but were denied, are permitted to intervene on appeal and (3) Eaton Apothecary, Louis and Clark Drug, Thrifty White Drug, the National Community Pharmacists Association, and the Pharmaceutical Care Management Association, non-class members who had not attempted to intervene in the district court, are not entitled to now intervene.

    Although the Court acknowledged that the pharmacy interests would likely lose money for some period of time as a result of the rollback provision of the settlement and that their interests were not formally parties to the case, the Court concluded that the judgment does not violate their due process rights nor had Rule 19 been offended. The Court noted that their interests "had been vigorously address by arguments and evidence from pharmacy interests who were present and were considered by the district court in the passing on the settlements," and that the pharmacy interests had not suggested that Rule 19 had been offended during the district court case.

    On the merits of the case, the Court affirmed the district court's approval of the settlement. The Court stated that the rollback is sensible because it would recover some of the profits gained and provide some compensation for past overcharges.