Healthcare Matters

There’s a great old Tower of Power song called “It’s Not the Crime” that has a refrain that goes like this: “It’s not the crime and it’s not the thought; it’s not the deed; it’s if you get caught.”

If McKesson “committed no crime,” then it may be taking the notion of “cutting its losses” and/or “legal expediency” to a new level. Agreeing to pay the DOJ $190 million to settle a false claims allegation while at the same time announcing that you’ve set aside an additional $173 million for the states to fight over versus going to court to preserve your good name?  Well, it’s usually a tougher call than most of us realize, unless of course you’ve been caught and jumped to settle the same charges previously.

The DOJ alleges that McKesson reported inflated average wholesale pricing (AWP) to First Data Bank, causing the government and various union insurance programs to overpay. Nothing all too clever going on here. McKesson is accused of entering inflated pricing data into a database the government uses to track its costs. And it’s not the first time: back in 2008, McKesson settled a very similar class action brought by the New England Carpenters Health Benefits Fund for $350 million. Same inflated pricing charges, same reporting database, pretty much the same total fine. Hey, maybe McKesson and First Data Bank ought to invest in some data entry validation technology?  I’m sure there’s a solution out there for less than $700 million.

About the allegations and settlement, Kris Fortner, a McKesson spokesman said: “…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.” For all of you who appreciate the wisdom and discipline of cutting losses –without admitting any wrongdoing of course—please know that the DOJ isn’t known for chasing rabbits. To the contrary, it is known to have an appetite for low hanging fruit. The continued practice of manipulation of AWP by the drug manufacturers, which leads to several hundred million in settlements, which leads to continued manipulation of AWP by the drug manufacturers, which… isn’t much of a head scratcher when you review the history. I think it’s known as a virtuous loop.

The DOJ has been all over the practice of drug companies manipulating average wholesale drug prices for several years now –and business has been great. More than $2 billion has been recovered from drug manufacturers accused of reporting inflated prices to First Databank.”Our analyses of drug price reporting practices—including the use of ‘average wholesale price’—have consistently identified excessive Medicare and Medicaid payments resulting from these practices,” HHS Inspector General Daniel Levinson said in a written statement.

By the way, if you didn’t click on the link, check out “It’s Not the Crime” by Tower of Power. An oldie but a goodie.

—Tom Finn