On August 26, 2008, a District of Massachusetts Federal District Court dismissed an antitrust class action challenging an agreement between McKesson, a drug wholesaler, and First Databank, a publisher of drug prices, to inflate the average whole price and thus the price paid by insurer providers to pharmacists. Relying on the U.S. Supreme Court’s decision in NYNEX Corp. v. Discon, 525 U.S. 128 (1998), the court held that high prices to consumers cannot support an antitrust claim where the complaint failed to allege that the competitive process was restrained. Discon, however, is distinguishable on two grounds. First, it held only that a fraudulent agreement between a supplier and a service provider was not per se illegal under the Sherman Act. The Court did not reach the rule of reason argument that was rejected by the Massachusetts court here. Second, the conduct in Discon involved the usually pro-competitive act of changing service providers. The Court made clear that per se condemnation want improperly inhibit firms seeking to change suppliers. Because supplier termination decision are generally made for pro-competitive reasons, fear of per se antitrust liability would likely harm consumers. The McKesson/First Data agreement to artificially inflate prices, by contrast, did not arise in a similarly pro-competitive context. Inhibiting that sort of agreement would thus not likely harm consumers. For these reasons, a more careful examination of the case under the Rule of Reason would be appropriate.
Update: November 2008: While maintaining that it did not act anticompetitively, McKesson has agreed to settle outstanding claims against it for $350 million. The settlement is subject to court review.
Update 10/17/08: The state of Oklahoma has filed similar claims in the Massachusetts court.