First DataBank

First DataBank, Inc. (FDB), currently owned by Hearst Corporation, is a publisher of pharmaceutical industry market information and information technology. The firm, headquartered in San Bruno, California, is best known for its controversial drug pricing surveys of the McKesson Corporation, a drug wholesaler, to determine benchmarks for what drug retailers in the United States are charged by wholesalers. First DataBank is the top publisher of pharmaceutical market surveys, which in turn are used by insurers, state health programs and other drug buyers for the purpose of negotiating reimbursement rates paid to pharmacies and other providers.[1]

First DataBank touts itself as "the leading provider of context-relevant, integrated drug database products." The firm creates and maintains widely used drug database products, software for drug database integration, and drug reference products. The firm has partnered with other developers of drug information systems to make drug data useful for a wide range of drug delivery system users. The firm's software supports pharmacy dispensing, formulary management, drug pricing analysis, medical insurance claims processing computerized physician order entry (CPOE), electronic health records (EHR), electronic medical records (EMR), electronic prescribing (e-Prescribing) and electronic medication administration records (EMAR).

First DataBank influences the incidence of medication errors and adverse events associated with prescription drugs that have an impact on healthcare costs and the overall quality of patient care. As it transitions away from publishing drug price databases, First DataBank is poised for entry into areas such as electronic prescribing and electronic health records.

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National Drug Data File Plus

First DataBank's National Drug Data File Plus provides prices, descriptions, and collateral clinical information on drugs approved by the US Food and Drug Administration (FDA), plus commonly used over-the-counter drugs, herbal remedies, nutraceuticals and dietary supplements.

OrderView Med Knowledge Base

First DataBank has developed an electronic physicican drug ordering system that enables physicians to quickly look up and order drugs, sometimes as easily as using just two mouse clicks. Drug orders are generated based on patient parameters such as age, weight, renal and hepatic impairment, thereby reducing lists of candidate drugs to a minimum. The system is expected to have an impact on the number of adverse drug reactions and side effects at facilities that have adopted the electronic drug order entry system, such as Beth Israel Deaconess Medical Center, an affiliate of Harvard Medical School.

Litigation

A consumer coalition filed separate suits in a Boston, Massacussetts federal court against drug wholesaler McKesson Corporation and First DataBank, accusing the companies of artificially inflating drug prices. The lawsuits say that McKesson and FDB conspired from 2002 through 2005 to set the list prices artificially high. The suit against First DataBank accused it of limiting its survey of wholesalers to a single company, McKesson.

The plaintiffs contend that the practices have driven up the wholesale cost of drugs for institutional buyers, including health insurers and government programs such as Medicaid, which in turn has cost taxpayers and insurance buyers billions of dollars. Neither company may reap financial rewards directly from widening the spread between the two benchmarks, but the plaintiffs claim the defendants have another motive, performing favors for their drug industry customers. McKesson claims it does not benefit from a higher average wholesale price. A McKesson spokesman said, "An increase or decrease in branded AWPs has no impact on McKesson's wholesale business or its financials."

In a settlement agreement tentatively approved by the federal court, First DataBank will not pay any damages to the plaintiffs, but has agreed to reduce average wholesale prices (AWPs) by five percent for about 2,033 drugs. However, McKesson has chosen to fight the suits. Both firms deny any wrongdoing. McKesson claims it was unaware that it was the only company in First DataBank's survey, and that FDB testified under oath that it never informed McKesson it had restricted its survey to one company.

Stock prices of drug wholesalers and drugstore chains declined in a selloff after reports that FDB's legal settlement could reduce drug middleman costs by at least $4 billion a year.[2]

Health care purchasers say the alleged price fixing adds substantial costs. One plaintiff, the New England Regional Council of Carpenters, estimated the settlement could save it about $400,000 a year, or four to five percent off the $10 million that the union's health fund pays to cover medications for about 18,000 people.

"This case is going to lead payers to demand more transparency in drug pricing," said Alex Sugerman-Brozan, director of the Prescription Access Litigation Project in Boston, which filed the suits. "It's this entire shadowy world that leads to massive overcharging."

Proposed settlement terms

On June 7, 2007 the United States District Court, District of Massachusetts granted 'preliminary approval' to the terms of the proposed price fixing litigationsettlement. According to the pending settlement, First DataBank will:

• Adjust reporting of Blue Book Average Wholesale Prices for certain prescription drugs contained in National Drug Data File Plus (NDDF Plus) by reducing the mark-up to 1.2 (20%) for all NDCs that have a mark-up factor to actual cost (i.e., 'direct price') in excess of 1.2
• Discontinue publishing the Blue Book AWP data field for all drugs within two years after the effective date of the final court order
• Establish a centralized data repository to facilitate reasonable access to discoverable material from First DataBank concerning its drug price reporting practices
• Work with major participants in the healthcare industry in court approved discussions to facilitate the establishment of a sustainable benchmark for drug reimbursements

Leadership

Donald M. Nielsen, MD, is the CEO of First DataBank. He was appointed on July 11, 2006, by Hearst Business Media, a unit of the Hearst Corporation.