The big pharmaceutical distributor was charged with engaging in a scheme to fraudulently inflate the price of more than 400 prescription drugs, including the most widely used meds.

The litigation, which was filed in 2005, claimed McKesson and First DataBank, which publishes pricing data, reached a secret deal on how the so-called average wholesasle price would be set for brand-name drugs, and in doing so, raised the spread between the published AWP and the actual acquisition costs from 20 to 25 percent in an effort to increase profits.

Last March, a federal judge in Boston certified the lawsuit as a class action and allowed it to be tried under the US Racketeer Influenced and Corrupt Organizations Act, or RICO (look here). A trial was set for December 1, but McKesson, which admitted no wrongdoing, made the deal to avoid the “uncertainty” of litigation. The wholesaler will also set aside about $143 million to settle claims from state health programs (see McKesson statement and here is the original lawsuit).

Just the same, McKesson still faces similar lawsuits by state and local governments. San Francisco sued the distributor last May, saying McKesson’s price manipulation cost consumers “hundreds of millions of dollars.” The state of Connecticut also filed such a suit.

The plaintiffs claimed the listed prices, which were used by payors to set reimbursement rates, were “arbitrarily” increased from 2001 to 2005 by McKesson and First DataBank, not through surveys of wholesalers. While McKesson itself didn’t directly gain from the alleged practice, the distributor increased its market share with retailers, costing $5 billion in inflated prices.

“The impact of this settlement is very significant for all who have paid for brand-name drugs,” Steve Berman, managing partner at Hagens Berman Sobol Shapiro and lead counsel for the plaintiffs, says in a statement.