Drug Warfare

A Marin pharmacist sticks up for the little guys, and gets run over

His name is Fred, but they call him David. And in this particular story, the nation's billion-dollar pharmaceutical industry played the role of Goliath.

Nearly seven years ago, Marin pharmacist Fred Mayer formed an organization of like-minded Davids and began suing the world's largest drug companies, accusing them of price-gouging for charging traditional pharmacies more for drugs than HMOs and hospitals.

Mayer's allegations spread like a rash across the country -- much like the lawsuits against tobacco companies -- and spawned dozens of similar suits. Ultimately, cadres of high-priced lawyers were drawn into the fray, and drug companies found themselves facing monumental claims.

The drug manufacturers began agreeing to settle the suits by paying out hundreds of millions of dollars. Though the pharmaceutical giants are admitting no wrongdoing, they have agreed to change some of their pricing policies.

But Mayer's role as David did not end when the settlements were announced.
In fact, his second act played out recently in San Francisco Superior Court, where Mayer unsuccessfully sought to block the settlement of the class-action suit that was brought on behalf of California consumers.

The California case, one of the original price-gouging suits, all but ended April 21, when a Superior Court judge approved a settlement under which the drug companies will atone for their pricing practices by giving $148 million in brand-name pharmaceuticals to nonprofit clinics.

In what might seem like an odd twist, Mayer objected to the settlement. Essentially, he says, the agreement let the pharmaceutical companies off the hook. The class-action lawyers, Mayer says, made a bad deal for consumers -- and a lot of money for themselves.

Needless to say, the attorneys do not agree.
For 35 years, Mayer ran the Sausalito Pharmacy. In 1994, he closed shop, he says, primarily because major drug companies like Merck & Co., Glaxo Inc., Bristol-Myers Squibb, Pfizer, and others were selling their drugs to HMOs, hospitals, and mail-order drug wholesalers at significantly lower prices than what they charged independent pharmacies.

For instance, HMOs could buy Synthroid, a widely used thyroid medication made by Knoll Pharmaceuticals, for $1.75 per 100 tablets, but the company charged pharmacies $27.06. Basically, big HMOs were able to deliver market share by telling their doctors which drugs to use, and therefore negotiate favorable prices. Meanwhile, retail pharmacy customers were paying higher prices, and traditional pharmacists lost business.

Mayer, unwilling to walk away quietly, formed the nonprofit Pharmacy Defense Fund, which hired the late Joseph Alioto to file a class-action lawsuit on its behalf. In all, the Defense Fund filed five lawsuits, including the one just settled in San Francisco.

After Mayer's group got the ball rolling, big chains like Walgreens joined in, and similar suits mushroomed across the country. Alioto became increasingly ill and died in 1996. The pharmacists persevered with Petaluma attorney James Dombroski.

Most of the class-action suits outside of California were combined into one whopper of a case in federal District Court in Chicago, directed by a committee of lawyers, including San Francisco attorney Guido Severi. By 1998, settlements had been crafted with the majority of the drug companies involved, calling for them to pay nearly $700 million to pharmacies and $64 million to consumers. Four drug companies did not settle, and prevailed in a Chicago trial. The case is now pending in a federal appeals court there.

Rather than attempt to pay the money back to the individual consumers and pharmacies that were damaged, as is customary in class-action suits, the Chicago courts directed that the money be distributed to nonprofit clinics through the National Association of Community Health Centers.

In February, 19 drug companies agreed to settle for $176 million the class-action suit filed on behalf of consumers in San Francisco Superior Court. And, following the lead of the earlier, federal court case, the settlement booty is to be paid to nonprofit clinics, in this case through the California Public Health Foundation in Berkeley.

However, this particular settlement doesn't require the drug companies to pay out in cash. Instead, they are being allowed to simply give $148 million worth of free pharmaceuticals to the clinics. Another $28 million is awaiting the court's approval for attorney's fees and expenses to administer the program.

The deal was hashed out by plaintiffs' lawyers, together with a team of doctors and pharmacists. But Mayer and his gang say the deal was cut badly, and that the drugs that will be handed over are not necessarily the ones clinics need.

"From a public health standpoint, I like the fact that the drugs are going to the clinics," says Mayer, who is also former president of the California Public Health Association, an organization that includes the clinics. "But the drugs they need are not the drugs coming down the pike. What you need are simple drugs: cold medication, blood pressure medication, simple drugs for pain."

Mayer complains that the pharmaceutical companies are offering up expensive drugs that clinics cannot continue to stock after their patients start taking them, and that many are just plain wrong for free clinics, like medication to treat high cholesterol and heart problems.

"The credence of pharmacy medicine is 'The right drug at the right time, in the right place,' " Mayer says. "This is not that. These are drugs they [drug companies] want to get rid of.

"What we need are things like penicillin, ampicillin, and tetracycline [antibiotics]."

More importantly, however, Mayer objected to the settlement because it lacks a mandate for the drug companies to change their behavior.

"It's all about money," says Mayer. "It's not about solving problems or getting them to reduce the price of prescription drugs."

The drug companies basically will pay out the California settlement without having to admit wrongdoing. But plaintiffs' lawyers contend that the settlement is a good deal for consumers, and that the price issue has already been addressed. The federal settlement in Chicago, which involved many of the same pharmaceutical companies, included a provision that the companies begin offering the same bulk discounts to pharmacies as they offer to the HMOs.

Mayer gave the court a piece of his mind at the April 21 settlement hearing, which was attended by enough attorneys to fill a whole hallway of courtrooms. But his objections were to no avail. The settlement stands, unless someone decides to appeal. Mayer says his group is tapped out, having already spent about $2 million in legal fees.

"I have to disagree with his [Mayer's] position," says Joshua Davis, a plaintiff's attorney in the San Francisco settlement. "What Mayer really argued was that they [the drugs] are not appropriate for the particular clinics where he has worked.

"We had pharmacists who buy for Los Angeles County, in the East Bay, and another pharmacist who buys psychiatric medications involved in the settlement negotiations. We wanted what clinics across the state can use," Davis says. "I think it's a very successful outcome."

The San Francisco courtroom drama, which was presided over by Judge Alfred Chiantelli, was not without some interesting plot twists. When Mayer testified before the judge in February, his comments somehow were left out of the official court record. After much speculation between attorneys, Chiantelli officially chalked up the mystery to a court-reporting error. It seems few were paying attention to David anymore.

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