Independent pharmacies accuse Express Scripts of price fixing in lawsuit

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A handful of independent pharmacies is suing Express Scripts for allegedly signing a three-year deal with pharmacy benefit manager Prime Therapeutics to fix reimbursement rates, a violation of the Sherman Act.

The lawsuit called the arrangement anticompetitive and unlawful. It alleges that the deal spurred both companies to charge a higher transaction fee rate to retail pharmacies, while they reimbursed at a lower rate.

Before the deal, the suit said, Prime Therapeutics collected lower fees from pharmacies and reimbursed them more than Express Scripts for dispensing drugs, but once the deal was completed, Prime charged the same transaction fees and reimbursed at the same level as Express Scripts.

The agreement, the lawsuit alleges, allows Prime to essentially "borrow" Express Scripts' considerable market power to lower reimbursement rates and impose higher transaction fees, resulting in higher profits.

Prime Therapeutics is not named as a defendant in the suit. Express Scripts is owned by Cigna.

WHAT'S THE IMPACT?

PBMs position themselves as intermediaries between drugmakers, pharmacies and health insurers to negotiate drug prices and maintain lists of insurance-covered drugs, or formularies.

The four independent pharmacies that brought the lawsuit – two in Wisconsin, and one apiece in New Jersey and Minnesota – allege that the partnership between Prime and Express Scripts served solely as a price-fixing mechanism and did not bring with it any new efficiencies.

Express Scripts covers about 100 million people in the U.S., with Prime covering about 33 million. The partnership materialized four years ago, when Express Scripts said it would handle rebate negotiations with drugmakers, as well as retail pharmacy network contracting for Prime.

Alleging that Express Scripts and Prime have not integrated any assets or business functions, it called the agreement between the two companies "a naked restraint of trade."

A spokesperson for Express Scripts said the lawsuit was without merit, adding that the company was committed "to reimbursing network pharmacies fairly and will vigorously defend ourselves against the baseless allegations in this complaint."

THE LARGER TREND

Claiming that its old policy statements no longer reflect current market dynamics, the Federal Trade Commission voted to rescind its prior statements of advocacy for pharmacy benefit managers in July, effectively ending the agency's previously stated endorsement of PBMs.

According to the FTC, the new statement pulling its advocacy is a response to PBMs' continued reliance on older FTC advocacy materials that opposed mandatory PBM transparency and disclosure requirements.

It also warns against reliance on the commission's prior conclusions, particularly given the FTC's ongoing study of the PBM industry to update its understanding of the industry and its practices.

A year ago, after the FTC first announced its study into PBM practices, a number of pharmaceutical groups came out in favor of the FTC inquiry. The American Pharmacy Cooperative said it had long advocated for federal oversight of PBMs.

In September, PhRMA released Nephron Research that contends PBMs are driving up profits and drug prices through fees. PBMs demand double the amount of fees today than they did five years ago, according to the report.

Congress has been investigating PBM practices. Earlier this year, the House Committee on Oversight and Accountability said CVS Health's CVS Caremark, Cigna's Express Scripts and United Health Group's Optum Rx control an estimated 80% of the PBM marketplace. 

In Committee Republicans' December 2021 report, findings revealed that large PBM consolidation has negatively impacted patient health, increased costs for consumers, forced manufacturers to raise their prices, and created conflicts of interest which distort the market and limit high-quality care for patients, the committee said.

Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com