Drug Middlemen Accused of Price Fixing by Ohio Attorney General
Lawsuit alleges certain PBMs shared information to gain leverage during rebate negotiations with drugmakers
A price-fixing lawsuit that Ohio filed Monday against several firms that manage billions of dollars in drug benefits ratchets up scrutiny of the companies while shining a spotlight on their new tactic using overseas subsidiaries.
The lawsuit filed Monday by the Ohio attorney general in a state court alleges Cigna Group, Humana Inc. and Prime Therapeutics LLC shared pricing and other information gathered by a Swiss subsidiary to gain leverage during negotiations with drugmakers for rebates.
The companies restricted coverage of some insulins and other medicines due to the collusion, the lawsuit said. If they didn’t get the desired rebate, the companies wouldn’t pay for the drugs or would favor competitors, the lawsuit said.
Neither Cigna nor Humana immediately responded to requests for comment. Prime said it is a part owner of the Swiss firm to negotiate drug savings and improve affordability for health plans and their members. Cigna’s Express Scripts business and Prime said in 2019, when they announced a collaboration, it would provide more affordable care for clients while staying transparent and flexible with them.
The filing comes as some policy makers explore the role the healthcare companies play in high drug costs and after the Federal Trade Commission, House Republicans and several states have launched investigations into the firms, called pharmacy-benefit managers or PBMs.
The companies play a largely hidden but important role in the prescription-drug supply chain, serving as middlemen among the companies that make drugs, the health insurers that pay for the treatments and the pharmacies that dispense them.
Governments, employers and unions hire PBMs to manage their payments for prescription medicines. In addition to processing payments to pharmacies, the PBMs aim to control spending by deciding which drugs they will pay for depending on the rebates they negotiate with pharmaceutical companies. PBMs can restrict access to drugs that aren’t discounted enough by refusing to put them on a formulary, or list of medicines, they will pay for, or preferring certain drugs over other ones. The companies also steer use to some medicines over competitors by categorizing some as preferred and charging patients lower out-of-pocket costs.
PBMs say they pass along savings to their customers. The companies can make money by getting a percentage of the rebates and through other fees that drugmakers agree to during negotiations to pay.
Some drugmakers, government officials and other critics say the firms are making medicines less affordable because they can negotiate larger rebates off higher prices and then take a bigger sum for themselves.
“They’re bringing no value to the supply chain,” Ohio Attorney General Dave Yost said in an interview before the lawsuit was filed. “All they’re doing is inflating the price.” His lawsuit centers around their use of group-purchasing organizations that PBMs formed in recent years to help during their drug negotiations.
Express Scripts, a PBM owned by health insurer Cigna, set up a GPO called Ascent Health Services in Schaffhausen, Switzerland, in 2019, according to the lawsuit. Prime Therapeutics, which is a separate PBM owned by Blue Cross and Blue Shield plans, later took a minority ownership stake, the lawsuit said.
The lawsuit alleges Express Scripts, Prime and Humana’s PBM, which is a customer of Ascent, used it to coordinate their negotiations and fix the amounts of rebates. Ascent negotiated drug prices for Express Scripts and other PBMs that used Ascent, the lawsuit said. The lawsuit said the PBMs used Ascent to share information about drug pricing and used that information to pressure drugmakers to pay the highest rebates. “Ascent was, they realized, the perfect vehicle with which to harmonize and increase drug prices, Rebates, fees,” the lawsuit said.
If a company didn’t get a desired rebate, it independently decided to exclude drugs from formularies or gave the medicines a lower preference, the lawsuit said. Express Scripts excluded 563 drugs from its formularies in 2022, up from 57 in 2014, according to the lawsuit.
PBMs began establishing GPOs after the Trump administration, in 2019, proposed eliminating the rebates the companies negotiated on behalf of privately-run Medicare health plans and state-run Medicaid plans and direct the sums to patients, healthcare analysts said. An Express Scripts executive said in a conference call with analysts in 2020 that the company established Ascent to “get and protect rebates,” and the firm could work with other businesses “in more durable ways than just a PBM or a rebate contracting relationship.” The Inflation Reduction Act passed last year went ahead with the rebate-elimination plan, but delayed implementation until 2032.
The GPOs may help provide a new source of revenue for the PBMs through fees assessed to drugmakers, said Adam J. Fein, who heads the Drug Channels Institute, which provides research on the drug-supply chain.
Mr. Fein said the PBMs may share some of the new revenue from GPO fees with their clients while keeping the rest for themselves. Health plans may not know though because GPOs add a new layer of organization to negotiations, he said.
PBMs work with GPOs to help secure additional savings from pharmaceutical companies, which lowers the cost of drugs for employers and patients, a spokesman for the Pharmaceutical Care Management Association, an industry trade group, said before the lawsuit was filed.
Reporter: Jared S. Hopkins at email@example.com