PBMs Under Pressure From New Legislation and Fresh Lawsuits

April 24, 2019
Kelly Davio

Earlier this month, pharmacy benefit managers (PBMs) were called before the Senate Finance Committee to answer questions about how their businesses impact drug prices for Americans. While the executives deflected criticism and pointed to issues like legal challenges to biosimilars as playing a key role in keeping drug prices high, lawmakers and officials are taking steps to rein in PBMs.

Earlier this month, pharmacy benefit managers (PBMs) were called before the Senate Finance Committee to answer questions about how their businesses impact drug prices for Americans. While the executives deflected criticism and pointed to issues like legal challenges to biosimilars as playing a key role in keeping drug prices high, lawmakers and officials are taking steps to rein in PBMs.

This week, Representative Peter Welch, D-Vermont, announced 2 new bills targeting PBMs’ practices. The first bill would prevent PBMs from imposing retroactive fees on pharmacy drug sales, while the second would prohibit PBMs from excluding small, independent pharmacies from joining preferred pharmacy networks that fill prescriptions for Medicare beneficiaries.

According to Welch, these bills will address 2 significant threats to local pharmacies to help ensure fair competition and keep small pharmacies in business.

Separately, Dave Yost, attorney general of the state of Ohio, has filed a lawsuit against the PBM OptumRx.

According to the complaint, filed in Franklin County, Ohio, OptumRx, which served as the Ohio Bureau of Workers Compensation (BWC)’s PBM from 2009 to October 2018, breached its contract with the state. The breaches alleged include failure to provide a guaranteed discount on generic drug prices, resulting in nearly $16 million in damages, and making misrepresentations to the state in order to be selected as its PBM.

The complaint explains that, in 2009, the BWC sought to enter into a pass-through contract with a PBM, in which the selected PBM would receive only administrative fees for its transactions conducted on behalf of the BWC. In such an arrangement, the PBM would be obligated to pass through the costs of drugs without markup, eliminating the possibility of spread pricing or rebates.

“Deprived of the opportunity to ramp up profits,” says the complaint, the PBM “found another way to add to its bottom line at the expense of BWC—by failing to provide the promised and agreed to pricing discounts for drugs purchased by BWC claimants.”

The complaint explains that OptumRx did not comply with its contractual duty to provide minimum average discounts of 74% off average sales price to BWC, as determined by an independent consultant hired to examine compliance. When BWC threatened to terminate the contract, OptumRx amended the contract. According to the BWC, the PBM then failed to meet its obligations under the amendment. Later, the PBM also increased the prices of drugs without explanation.

“When challenged by BWC about its failure to abide by the [agreement],” reads the complaint, OptumRx “tellingly, did not deny BWC’s obligations…instead Defendant admitted it had breached the agreement.”

Ohio is seeking a trial by jury and has asked for compensatory damages, punitive damages, all costs of litigation, and other relief the court deems to be appropriate.

In a statement, Yost said that the state’s review of PBM practices is ongoing and called this lawsuit “the first raindrops” in a coming storm.

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