Although PBMs have been alleged to engage in these types of tactics before, other lawsuits also joined pharmacies and/or drug manufacturers.
Ohio Attorney General Dave Yost filed a lawsuit in an Ohio court on March 28, 2023, that is the first of its kind. The suit accuses Express Scripts Inc. and Prime Therapeutics―two pharmacy benefit managers (PBMs)―of conspiring to increase medication prices and, as a consequence, increase the costs passed on to patients.
The complaint alleges that Express Scripts and two other PBMs control over 75 percent of the drug market. The complaint further alleges that Express Scripts has benefitted from this market consolidation by creating a “pay to play” rebate system that causes manufacturers to increase drug prices to increase Express Scripts’ own profits by shifting costs to consumers. This allegedly works by giving preferred placement to drugs with higher prices on PBMs’ formularies, despite Express Scripts’ public claims that it uses its market dominance to lower manufacturer drug prices. These increased prices also negatively affect pharmacies’ profits.
The complaint alleges that Express Scripts’ tactics affect retail pharmacies in three ways:
- Coercing retail pharmacies into contracts with low―often below-cost―reimbursement rates;
- Charging high and always increasing administrative fees and other unfavorable contract terms; and
- Charging unlisted “clawback” fees, which are charged weeks or months after the drug is dispensed to the consumer.
Further complicating matters, Express Scripts formed a “group purchasing organization” called Ascent Health Services LLC in 2019. The stated purpose was to take over Express Scripts’ pricing and rebate negotiations with drugmakers. However, Express Scripts has since given competitor Prime Therapeutics LLC an ownership stake in Ascent and moved its operations from the United States to Switzerland. This adds to the alleged lack of transparency in pricing negotiations. The complaint alleges that Ascent Health Services now acts as an intermediary, helping Express Scripts and Prime Therapeutics coordinate on pricing, discounts and rebates, and obscuring fees further. Another competing PBM, Humana Pharmacy Solutions, also became an Ascent customer and joined in with this alleged collusion. The suit names Express Scripts, Ascent, Prime Therapeutics and Humana Pharmacy Solutions as defendants along with Cigna Group, parent company of Express Scripts, Evernorth Health, another subsidiary of Cigna, and Humana, parent company of Humana Pharmacy Solutions.
Although PBMs have been alleged to engage in these types of tactics before, other lawsuits also joined pharmacies and/or drug manufacturers. Here, the Ohio attorney general is accusing PBMs of acting alone to increase profits and benefit from antitrust violations and deceptive trade practices. The complaint seeks injunctive relief in the form of ending the scheme, payment of fines and disgorgement of ill-gotten profits.
Attorney General Yost referenced the increasing cost of insulin to describe the negative effect increased prices have had on consumers. “Medications shouldn't cost an arm and a leg, metaphorically or literally… . Insulin is just a symptom of the problem; PBMs are the disease,” Yost said in a statement.
Duane Morris attorneys will continue to monitor developments in this area and other related issues and report on the key details for the industry in subsequent Alerts.
For More Information
If you have any questions about this Alert, please contact Jonathan L. Swichar, Bradley A. Wasser, Eliese R. Herzl-Betz, any of the attorneys in our Pharmacy Litigation Group or the attorney in the firm with whom you are regularly in contact.
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