Pharmacy Benefit Managers (PBMs) are third-party administrators that are responsible for managing prescription drug benefits for health insurance plans, self-insured employers, and government programs such as Medicare and Medicaid. PBMs play a critical role in the healthcare system, but their business practices have come under scrutiny in recent years.
There have been allegations of unfair practices and corruption within the industry, which have led to higher drug prices and decreased access to medications for patients.
One of the main criticisms of PBMs is their lack of transparency. PBMs negotiate drug prices on behalf of health insurance plans, but the discounts they negotiate with drug manufacturers are often not passed on to patients. Instead, PBMs may keep a portion of the discounts as revenue or use them to negotiate better rates with pharmacies. This lack of transparency makes it difficult to know if patients are receiving the best possible prices for their medications.
An example of an unfair practices was the use of “gag clauses” in contracts between PBMs and pharmacies. These clauses prohibit pharmacists from informing patients about cheaper alternatives to their prescribed medications, such as generic drugs. This practice prevented patients from making informed decisions about their healthcare which led to higher costs for both patients and insurers.
PBMs also engage in a practice known as “spread pricing,” where they charge health plans more for drugs than they pay pharmacies for the same drugs. The difference between the amount PBMs charge and the amount they pay is known as the “spread,” and PBMs may keep the difference as revenue. This practice can lead to higher costs for patients and insurers, as well as decreased access to medications.
In addition, PBMs have been accused of steering patients to certain drugs based on financial incentives. PBMs may receive rebates from drug manufacturers for promoting certain medications, which can influence their decisions about which drugs to include on a health plan’s formulary. This can lead to patients being prescribed medications that are not the most effective or cost-efficient options and often time cost thousands of dollars more than the comparable dugs.
Pharmacy Benefit Managers (PBMs) have faced a number of legal challenges in recent years. Many of these cases have focused on the business practices of PBMs, including their pricing and rebate practices, as well as their relationships with pharmacies and drug manufacturers. Below are some examples of cases against PBMs:
· Arkansas Blue Cross Blue Shield v. Express Scripts: In 2015, Arkansas Blue Cross Blue Shield sued Express Scripts, alleging that the PBM had engaged in a number of unfair business practices, including charging higher prices for drugs than it paid to pharmacies and failing to pass on rebates to the insurer. The case was settled in 2017 for $60 million, with Express Scripts denying any wrongdoing.
· UnitedHealth Group Inc. v. CVS Health Corp.: In 2018, UnitedHealth Group filed a lawsuit against CVS Health Corp. alleging that the PBM had overcharged the insurer for prescription drugs. UnitedHealth Group claimed that CVS had charged it more than what it had paid to pharmacies, a practice known as "spread pricing." The case was settled in 2020 for an undisclosed amount.
· National Community Pharmacists Association v. Express Scripts: In 2019, the National Community Pharmacists Association (NCPA) filed a lawsuit against Express Scripts, alleging that the PBM had engaged in a number of unfair business practices, including "gag clauses" that prevented pharmacists from telling patients about cheaper alternatives to their prescribed medications. The case was settled in 2020, with Express Scripts agreeing to pay $9.5 million and to make changes to its business practices.
· Anthem Inc. v. Express Scripts: In 2019, Anthem Inc. filed a lawsuit against Express Scripts, alleging that the PBM had overcharged the insurer by $15 billion over a five-year period. Anthem claimed that Express Scripts had failed to pass on discounts and rebates to the insurer and had charged higher prices for drugs than it paid to pharmacies. The case is ongoing.
These cases highlight the concerns that many have about the business practices of PBMs. While PBMs play an important role in the healthcare system, their lack of transparency and potential for financial conflicts of interest have led to increased scrutiny and legal challenges. As the healthcare landscape continues to evolve, it is likely that there will be further legal challenges to the practices of PBMs.
The lack of transparency and potential for financial conflicts of interest in the PBM industry have led to calls for increased regulation and oversight. There have also been efforts at the state level to address PBM practices. Some states have passed legislation requiring PBMs to be more transparent about their pricing and rebate practices, while others have banned unfair practices in contracts between PBMs and pharmacies.
In conclusion, the PBM industry’s lack of transparency and potential for financial conflicts of interest have led to concerns about unfair practices and corruption. Patients may be paying more for their medications than necessary, and their access to certain drugs may be restricted. Increased regulation and oversight of the PBM industry may be necessary to ensure that patients receive the best possible healthcare at a reasonable cost.
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