A federal appeals court this week upheld settlements in the First DataBank Inc. and Medi-Span Inc. case that stand to reduce the average wholesale prices (AWPs) of drugs paid to pharmacies, according to the National Association of Chain Drug Stores.

NACDS warned that the September 3 ruling by the U.S. Court of Appeals for the First Circuit could have a harmful impact on drug store chains and other pharmacy operators.

ALEXANDRIA, Va. — A federal appeals court this week upheld settlements in the First DataBank Inc. and Medi-Span Inc. case that stand to cut the average wholesale prices (AWPs) of drugs paid to pharmacies, according to the National Association of Chain Drug Stores.

NACDS warned that the September 3 ruling by the U.S. Court of Appeals for the First Circuit could have a big impact on drug chains and other pharmacy operators. The association and the Food Marketing Institute (FMI) appealed the settlements this spring and earlier this summer filed a supporting legal brief.

Under the settlements, First DataBank and Medi-Span are slated to reduce the AWPs of drugs to 120% of the wholesale acquisition cost on September 26. The companies also plan to stop publishing AWPs, which are used as a drug pricing benchmark.

“For three years, the National Association of Chain Drug Stores and allied organizations have been successful through legal action in preventing reductions to published AWPs for prescription drugs," NACDS president and chief executive officer Steve Anderson said in a statement Friday. "This has prevented subsequent reductions in reimbursement to pharmacies for the patient care they provide and thus has been a three-year campaign that was worth waging on behalf of pharmacies and the patients they serve."

He reiterated NACDS’ and FMI’s core argument in the case that pharmacies — and in turn patient care — should not be harmed by legal proceedings in which they weren’t originally involved. "That is what occurred when First DataBank and Medi-Span reached a settlement related to the publishing of reduced AWPs," he noted.

Anderson added that this week’s ruling "shifts the urgency for action to other arenas," notably to states.

"The fact remains that reduction of AWPs threatens to cut pharmacy reimbursement for drugs below their costs — an untenable position for any health care provider and for any business," he explained. "Fortunately, some private payers are taking steps to remedy this situation by making appropriate reimbursement adjustments. Likewise, we renew our call today to state Medicaid programs to take the only viable course for patient care and to address the flawed reimbursement that the reduced AWPs will create. For the good of beneficiaries, pharmacy looks forward to working with public payers to address this fragile situation.”

First DataBank, a subsidiary of Hearst Corp., and Medi-Span, a unit of Wolters Kluwer Health, were defendants in a class action filed in 2007, in which Medi-Span was charged with negligently publishing AWP information wrongfully inflated by First DataBank, a prior Medi-Span owner.