McKesson 2012 Annual Report Download - page 101

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
97
II. Other Litigation and Claims
On October 3, 2008, the United States filed a complaint in intervention in a pending qui tam action in the
United States District Court for the Northern District of Mississippi, naming as defendants, among others, the
Company and its former indirect subsidiary, McKesson Medical-Surgical MediNet Inc. (“MediNet”), now merged
into and doing business as McKesson Medical-Surgical MediMart Inc., United States ex rel. Jamison v. McKesson
Corporation, et al., (No. 2:08-CV-00214-SA). The United States (“USA”) alleges violations of the federal False
Claims Act, 31 U.S.C. Sections 3729-33, in connection with billing and supply services rendered by MediNet to the
long-term care facility operator co-defendants. The action seeks monetary damages in an unstated amount. On
July 7, 2009, defendants filed motions to dismiss the action filed by the relator, arguing that the relator was not the
original source of the claims which he attempts to pursue in his qui tam action. On March 25, 2010, the trial court
granted defendants’ motions to dismiss the relator and his complaint, which ruling was later affirmed on appeal by
the United States Court of Appeals for the Fifth Circuit. On June 2, 2010, the USA filed a motion for partial
summary judgment, seeking a finding that the Company’s co-defendant, a Medicare Part B supplier, failed to
comply with certain of the 21 Supplier Standards (“Standards”) established by federal regulations covering such
Medicare suppliers, and that the relevant claims for which MediNet provided contract billing and/or supply services
were rendered “false” by reason of such non-compliance. On July 2, 2010 the Company and MediNet filed their
opposition to the USA’s motion and themselves moved for summary judgment as to certain counts based on
numerous arguments, including that the USA cannot, as a matter of law, establish that the co-defendant Medicare
Part B supplier failed to meet the Standards. On March 28, 2011, the trial court issued its order denying the motion
of the USA and granting the partial summary judgment motions of the Company and its co-defendants on grounds
that, as a matter of law, the Standards had not been violated. All causes of action based on the alleged failure to
comply with the Standards were dismissed. In September of 2011, the Company and MediNet moved for summary
judgment on the USA’s remaining causes of action which motions were denied on February 14, 2012. In its pretrial
filings, the USA stated that it intends to seek damages, which after trebling as allowed by the False Claims Act, total
$82 million, and will additionally seek between $407 million to $814 million in fines and penalties. The McKesson
defendants strongly dispute any liability, disagree with those claims for damages, fines and penalties and, based on
experience, believe that such claimed damages amounts are not meaningful indicators of potential liability. On
February 21, 2012, a non-jury trial commenced. On March 8, 2012, the court set April 30, 2012 for the continuation
of the trial to allow the USA to present its revised claim for damages which the USA represented at trial would be
reduced from the amounts stated in pretrial filings. No rulings on liability or damages have been made yet.
As previously reported, the Company’s subsidiary, McKesson Medical-Surgical Inc. (“MMS”), has been named
as a defendant in multiple cases pending in Nevada state court alleging that plaintiffs contracted Hepatitis C after
being administered the drug Propofol during medical procedures conducted by third parties. All but seven cases
have been settled with no contribution from MMS, including the previously reported case with a jury verdict against
MMS for $6 million in compensatory damages and $18 million in punitive damages. Of the seven remaining cases,
the next trial date is January 2013.
Our subsidiary, Northstar Rx LLC, is one of multiple defendants in approximately 425 active cases alleging that
plaintiffs were injured after ingesting Reglan and/or its generic equivalent, metoclopramide. There are an additional
52 cases in California, currently stayed, involving over 2,000 plaintiffs. The cases usually include state law claims
for strict liability, failure to warn, negligence, and breach of warranty. Most of these cases are pending in state courts
in Pennsylvania, California and New Jersey, with other cases pending in Alabama, Louisiana, Missouri, Mississippi,
Oregon and Tennessee. Northstar Rx’s insurers are providing coverage for these cases. The Company believes that
all of these cases are subject to dismissal pursuant to the U.S. Supreme Court’s 2011 ruling in Pliva, Inc. v. Mensing,
which barred certain types of claims involving generic pharmaceuticals. The Company is also named in
approximately 850 cases as a distributor of these products.
On January 4, 2011, the Company was served with a qui tam complaint that was originally filed in
November 2005 in the United States District Court for the Eastern District of Pennsylvania by a relator, a former
employee of a Johnson & Johnson affiliate, against the Company, Johnson & Johnson and its affiliate companies,
and Omnicare, Inc., alleging that the Company received illegal “kickbacks” from the Johnson & Johnson defendants
in violation of the federal Anti-Kickback Statute, the False Claims Act and various state false claims statutes, and
seeking damages, treble damages, civil penalties, interest, attorneys’ fees and costs of suit, all in unspecified
amounts, United States ex rel. Scott Bartz v. Ortho McNeil Pharmaceuticals, Inc., et al., (No. 2:05-cv-06010). The
United States declined to intervene in the suit.