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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
94
On November 30, 2006, plaintiffs filed a Second Amended Complaint (“SAC”) which added a class of
consumers that made percentage co-payments in addition to the third party payor class (“consumer co-pay class”).
In addition, the SAC added a claim under California Civil Code § 3345 for treble damages for unfair practices. On
November 6, 2007, plaintiffs filed a Third Amended Complaint (“TAC”) largely repeating the allegations of the
SAC and adding a new class of uninsured consumers who paid usual and customary (“U&C”) prices for the
prescription drugs at issue in the case (“U&C class”). The TAC asserts the same claims asserted in the SAC on
behalf of the third party payor class, the consumer co-pay class and the U&C class, with the exception that the
claims of the U&C class are alleged to run through the present.
On March 19, 2008, the district court entered an order certifying the consumer co-pay class for all purposes for
the period August 1, 2001, to May 15, 2005, certifying the third party payor class for liability and equitable relief for
the period from August 1, 2001, to May 15, 2005, and certifying the third party payor class for damages for the
period August 1, 2001, to December 31, 2003.
On November 21, 2008, the Company announced that it had reached an agreement with plaintiffs to pay
$350 million in settlement of all claims on behalf of the three private payor classes alleged in the Private Payor
RICO Action relating to FDB’s published AWPs, along with the claims brought by these same private payors
alleged in a previously dismissed antitrust action. The Company also announced on November 21 that it recorded a
reserve of $143 million for pending and expected claims by public payor entities relating to FDB’s published AWPs.
As a result, in the third quarter of 2009, we recorded a $493 million pre-tax charge. The private payor settlement
provides that the Company will pay $350 million into a settlement escrow in installments following preliminary and
final approvals of the settlement, which escrow account shall be used for settlement administration costs, including
notice, attorneys’ fees as approved by the court and distribution to class members in a manner determined by
plaintiffs subject to court approval.
On July 24, 2009, the trial court issued an order approving the settlement of these matters. On August 21, 2009,
a settlement class member filed a motion challenging the order of approval and also a motion seeking leave to
intervene in the case and on November 5, 2009, the trial court denied both of those motions. On August 31, 2009,
the trial court entered judgment on the settlement and dismissed all private party claims against the Company. On
September 29 and 30, 2009, four appeals to the First Circuit Court of Appeals were filed by settlement class
members challenging the final judgment. Between November 30 and December 22, 2009, all four appeals were
voluntarily dismissed.
These private payor actions have been concluded, the releases have become final and binding on the classes and
the settlement consideration has been paid and is no longer subject to return to the Company. Accordingly, in the
third quarter of 2010, the Company removed its AWP litigation liability of $350 million and corresponding
restricted cash balance as all criteria for the extinguishment of this liability were met.
B. The Public Payor AWP Cases
Commencing in May of 2008, a series of complaints alleging claims nearly identical to the Private Payor RICO
Action were filed by various public payors — governmental entities that paid any portion of the price of certain
prescription drugs. These actions were all filed in the United States District Court for the District of Massachusetts
and were ultimately consolidated under the caption “In re McKesson Governmental Entities Average Wholesale
Price Litigation.” The public payor actions are assigned to the same court assigned to the related claims of private
payors. A description of these actions is as follows: