Within the newest instance of enforcement motion in opposition to pharmacy profit managers (“PBMs”), Michigan Lawyer Normal Dana Nessel just lately filed an antitrust lawsuit in federal courtroom in opposition to Categorical Scripts, Inc. and Prime Therapeutics LLC, alleging the 2 PBMs engaged in an illegal settlement to suppress pharmacy reimbursement charges and hurt competitors (the “Grievance”). The Grievance, introduced below each federal and Michigan antitrust statutes, in addition to Michigan’s public nuisance regulation, asserts that the PBMs’ conduct has pushed closures of unbiased pharmacies and contributed to the rise of “pharmacy deserts” throughout the state.
This case continues a pattern of aggressive federal and state scrutiny of PBM conduct, particularly within the wake of elevated consolidation and vertical integration within the pharmacy profit administration business. Well being plans, PBMs and pharmacies working in Michigan and different states ought to intently monitor this litigation, which can have implications for PBM pharmacy community contracting, reimbursement practices, community preparations and competitors insurance policies.
Background
PBMs act as intermediaries between well being plans, pharmacies and drug producers, negotiating rebates, facilitating pharmacy reimbursement and managing pharmacy networks. Categorical Scripts and Prime are among the many nation’s largest PBMs, with Prime affiliated with nonprofit Blue Cross and Blue Defend plans and Categorical Scripts working below The Cigna Group umbrella.
The Grievance
In accordance with the Grievance, Prime and Categorical Scripts entered right into a community “collaboration settlement” in late 2019 below which Prime outsourced its business pharmacy community to Categorical Scripts in alternate for a payment and entry to Categorical Scripts’ negotiated charges and infrastructure. The Grievance alleges that this settlement eradicated Prime as an unbiased competitor within the Michigan pharmacy reimbursement market, permitting Categorical Scripts to use decrease reimbursement charges throughout the board and leading to suppressed funds to unaffiliated, unbiased pharmacies. Moreover, the State of Michigan (the “State”) alleges that the suppressed reimbursement charges had been in lots of instances decrease than pharmacies’ precise price to dispense medicines, a dynamic that has pushed some pharmacies out of the market and exacerbated “pharmacy deserts,” notably in underserved city areas like Detroit.
The State seeks to dissolve the settlement between Categorical Scripts and Prime and enjoin additional conduct that might hurt market competitors or entry to care. Additional, the State alleges that the PBMs’ conduct violates:
- The federal Sherman Antitrust Act;
- The Michigan Antitrust Reform Act; and
- Michigan’s public nuisance regulation.
Evaluation
The lawsuit comes amid growing scrutiny of PBM practices and will function a playbook for different state Attorneys Normal searching for to additional regulate PBMs. Whereas the information on this case are distinct, conceptually, the lawsuit shouldn’t be the primary of its sort. In March 2023, the Ohio Lawyer Normal introduced swimsuit within the U.S. District Courtroom for the Southern District of Ohio in opposition to Categorical Scripts, Humana and Prime, alleging that the PBMs engaged in anticompetitive conduct that inflated drug costs and harmed unbiased pharmacies in Ohio. In January 2024, U.S. District Decide Michael H. Watson granted the Ohio AG’s movement to remand the case again to the Delaware County Courtroom of Widespread Pleas. That very same day, the defendants appealed the remand order to the U.S. Courtroom of Appeals for the Sixth Circuit, the place the case is at the moment pending.
In September 2024, the Federal Commerce Fee (“FTC”) filed an administrative grievance in opposition to the “Massive Three” PBMs (Categorical Scripts, OptumRx and Caremark Rx) and their affiliated group buying organizations, alleging that their rebate practices artificially inflated insulin costs in violation of Part 5 of the FTC Act.
In the meantime, as a part of its ongoing investigation of PBM practices, the FTC launched a report in January 2025, highlighting how the Massive Three PBMs collected over $7.3 billion in income between 2017 and 2022 by marking up drug costs at their affiliated specialty pharmacies. Whereas the FTC report has fueled requires elevated regulation, PBMs keep that their negotiating leverage and formulary administration ship crucial financial savings to employers, authorities applications and sufferers in an more and more costly pharmaceutical market.
Lastly, states have been energetic in passing PBM laws affecting varied facets of PBM practices, and PBM laws can also be being proposed on the federal degree.
Sensible Takeaways
- Pharmacies ought to monitor this case intently, as its end result might have an effect on reimbursement negotiations and PBM community inclusion.
- Well being plans working with PBMs ought to contemplate reviewing their contracts to make sure they align with antitrust danger mitigation methods.
- PBMs ought to proceed to observe this case in addition to the big selection of state and federal legislative and enforcement exercise going through PBMs, as state and federal businesses proceed to look at the aggressive results of consolidated pharmacy networks and pricing buildings.
Corridor Render will proceed to observe this litigation in addition to different PBM business developments. Corridor Render routinely works with pharmacies, well being plans and PBMs on a variety of PBM contracting, reimbursement, licensing and regulatory points.
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