Ohio AG files suit against Express Scripts and others over drug prices

Photo: Jeff Lagasse/Healthcare Finance News

In a lawsuit filed this week, Ohio Attorney General Dave Yost accused pharmacy benefit managers Express Scripts and Prime Therapeutics of using a little-known company based in Switzerland to drive up drug prices illegally – and ultimately push those higher costs onto patients.

This collusion, the lawsuit maintains, has been made possible by PBM market consolidation, which has left the three largest PBMs, including Express Scripts, in control of more than 75% of the drug market and the three next largest in control of much of the rest.

In marketing its services, Express Scripts touts its ability to leverage its significant market power to extract lower drug prices from drug manufacturers and promises to deliver cost savings to health insurers and employers – a promise that "is knowingly false," the lawsuit said.

Rather, Yost alleged that Express Scripts has used its dominance solely for its own financial gain, creating "a complex 'pay to play' rebate system that, perversely, pushes manufacturers to increase drug prices in order to be placed on, or receive, preferred placement on PBM formularies."  The savings that PBMs claim from the inflated list prices are illusory, he said.

Pharmacies, too – especially independent pharmacies – have been "strangled" by nefarious PBM tactics, the lawsuit claimed.

In order to stay in insurance networks, they often are forced to not only accept drug reimbursement rates far below what they have to pay for those drugs – with little, if any, of the cost savings passed on to employers or insured consumers – but also pay exorbitant "administrative" fees, Yost alleged. And pharmacies don't know how much a PBM will reimburse for a drug until long after the medication has been picked up by the customer, resulting in financial losses for the pharmacies when filling prescriptions, he said.

Yost uses Express Scripts' current battle with Kroger as an example: "When a shadowy business controls pricing and reimbursement rates to such an extent that even the nation's largest grocer can't turn a profit working with Express Scripts, imagine the impact on a mom-and-pop pharmacy in rural Ohio – and the local residents," he said.

WHAT'S THE IMPACT?

The lawsuit, filed in Delaware County Common Pleas Court, stands apart from other similar lawsuits in that it targets PBMs only, not pharmacies or manufacturers.

The suit alleges multiple violations of the Valentine Act, Ohio's antitrust law, which prohibits price fixing, controlled sales and other agreements that restrain trade and hurt competition. The Valentine Act is broader than its federal corollary, the Sherman Act, in that the Ohio law prohibits market harms, in addition to consumer harms.

In addition to Express Scripts, Prime Therapeutics, Ascent and Humana Pharmacy Solutions, Yost's lawsuit names as codefendants Cigna Group, parent company of Express Scripts; Evernorth Health, a subsidiary of Cigna; and Humana, parent company of Humana Pharmacy Solutions.

The defendants' unlawful arrangement, the suit said, has harmed not only manufacturers and pharmacies, but also employers and consumers.

Yost's lawsuit aims to halt the defendants' "secret and anticompetitive conduct and strong-arm tactics that have prevented free-market forces from ensuring that Ohio's most vulnerable citizens can afford the prescription drugs on which their lives depend."

THE LARGER TREND

PBMs were created in the 1960s to help health insurers contain drug spending, according to the American Medical Association. PBMs can stimulate price competition among drug manufacturers by shifting demand among competing substitute drugs. 

In turn, manufacturers offer rebates to PBMs for their drugs to be placed favorably in a drug formulary, which PBMs are then supposed to pass on to insurers or employers. 

"However, the PBM market needs to be competitive for rebates to be fully passed on to final consumers," an October 2022 AMA analysis stated. "It is not clear whether PBMs are (fully) passing on those rebates. Indeed, some economists argue that consolidation in the PBM market, combined with opaque pricing, is one cause of higher pharmaceutical prices."

Earlier this month, the House Oversight Committee launched an investigation into pharmacy benefit managers' tactics that Chairman James Comer, R-Ky., said are "harming patient care and increasing costs for consumers."

Comer called on senior officials at the Office of Personnel Management, CMS and the Defense Health Agency for documents and communications to determine the extent to which PBMs' practices impact healthcare programs administered by the federal government.

The committee is also calling on the largest PBMs – CVS Caremark, Express Scripts and OptumRx – to provide documents, communications and information related to their practices.

Calling their practices "anticompetitive," Comer said they're distorting the pharmaceutical market and limiting high-quality care.

In June, a number of pharmaceutical groups came out in favor of the Federal Trade Commission's decision to launch an inquiry into the business practices of the nation's six largest pharmacy benefit managers.

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