Four companies settle pricing lawsuit

September 1, 1998

Pharmaceutical Representative

CHICAGO - Abbott Laboratories, Hoescht Marion Roussel, Pharmacia & Upjohn and Rhone-Poulenc Rorer followed the precedent set by 11 other pharmaceutical manufacturers last month when they tentatively agreed to settle a class-action lawsuit brought against them by Walgreen Co. and other retail pharmacies.

CHICAGO - Abbott Laboratories, Hoescht Marion Roussel, Pharmacia & Upjohn and Rhone-Poulenc Rorer followed the precedent set by 11 other pharmaceutical manufacturers last month when they tentatively agreed to settle a class-action lawsuit brought against them by Walgreen Co. and other retail pharmacies.

The lawsuit, which was filed in 1993, alleged that pharmaceutical companies were involved in conspiratorial discounting and pricing practices that violated federal and state antitrust laws. They did so, the plaintiffs claim, by conspiring to impose a dual pricing system on its customers, granting discounts to managed care companies and not to retail pharmacies. The retail pharmacies argued that this unfairly passed higher costs on to them and their uninsured and underinsured customers.

Pharmaceutical manufacturers said they were justified in charging HMOs and hospitals less because the organizations are able to control the drugs their patients use, and therefore offer manufacturers greater assurance of sales.

In the settlement, Abbott Laboratories agreed to pay the plaintiffs $57 million, Hoescht Marion Roussel agreed to pay $149.5 million, Pharmacia & Upjohn agreed to pay $102.5 million and Rhone-Poulenc Rorer agreed to pay $33.9 million. Combined with previous settlements, the monies bring the total settlement figure to more than $700 million.

Two of the settling companies released statements reiterating that they felt they acted ethically and lawfully, but had agreed to settle in order to avoid lengthy, uncertain legal battles that could have hurt their shareholders and stakeholders.

"There was no conspiracy, and we believe we would have prevailed at trial," said Gerald P. Belle, president of Hoescht Marion Roussel North America. "The simple fact, however, is the class-action system allows plaintiffs' lawyers to put together such huge damage claims that even a small possibility that a jury could come to the wrong conclusion poses substantial risk to the company."

In a prepared statement, Pharmacia & Upjohn said it settled in order "to limit its financial exposure and to avoid a lengthy, costly and uncertain jury trial." The company added that the decision was made in the best interests of its business, and that it settled in order to focus on its "continuing turnaround and growth efforts."

Only four of the original 19 pharmaceutical manufacturers remain plaintiffs in the case, including Johnson & Johnson and Searle. PR