Our Take: Ohio AG sues Cigna, Humana, Prime Therapeutics and others, alleging PBMs engaged in price fixing
David Yost, attorney general for the state of Ohio, referred to pharmacy benefit managers (PBMs) as “modern gangsters” in a scathing news release last Monday that announced a lawsuit his office has brought against Express Scripts, Prime Therapeutics, and five other businesses.
The lawsuit alleges that three PBMs — Express Scripts (owned by Cigna), Prime Therapeutics (jointly owned by multiple Blue Cross Blue Shield plans), and Humana Pharmacy Solutions — used a group purchasing organization (GPO) called Ascent Health Services, now based in Switzerland but formed by Express Scripts in St. Louis in 2019, to drive up drug prices.
“[PBMs] were designed to protect and negotiate on behalf of employers and consumers after Big Pharma was criticized for overpricing medications, but instead they have absolutely destroyed transparency, scheming in the shadows to control drug prices on all sides of the market,” Yost said.
The lawsuit contends that market consolidation made it possible for the PBMs to collude in such a way, as the three largest PBMs — Express Scripts, OptumRx (owned by United Health Group), and CVS Caremark — control approximately 75% to 80% of the total PBM market share. The remainder of the market is controlled largely by the next three largest PBMs: Humana Pharmacy Solutions, Prime Therapeutics, and MedImpact, which is privately held.
The co-defendants named in the lawsuit include Express Scripts, Cigna, Prime Therapeutics, Humana Pharmacy Solutions, Humana, Ascent, and Evernorth Health, another of Cigna’s subsidiaries.
Prime Therapeutics owns a stake in Ascent, and Humana Pharmacy Solutions is a customer of the GPO.
In the press release, Yost’s office said Express Scripts formed Ascent purportedly to take over the company’s pricing and rebate negotiations with drug manufacturers in response to mounting public criticism of PBMs. Instead, the lawsuit claims, Express Scripts and Prime Therapeutics used the GPO to share pricing, discount, and rebate information with each other and with Humana Pharmacy Solutions, driving up drug prices.
The lawsuit states that although Express Scripts “touts its ability to leverage its significant market power to extract lower drug prices from drug manufacturers,” with the promise of delivering the cost savings to health insurers and employers, that promise “is knowingly false. Conversely, Express Scripts increases prices to employers and patients.”
“Rather than use its bargaining power to place drugs on formularies based on lower price and better efficacy, Express Scripts effectively forces brand-name drug manufacturers to set higher prices in exchange for desirable formulary positions, while limiting patients’ access to low-cost generics and other cheaper alternatives,” the lawsuit states.
Employers and consumers are not the only ones paying the price, Yost’s office noted: “Pharmacies, too — especially independent pharmacies — have been ‘strangled’ by nefarious PBM tactics.”
To stay in-network with insurers, pharmacies often must accept drug reimbursement rates below what they pay for the drugs, the AG’s office explained, and the PBMs pocket the difference. Pharmacies also have to pay the PBMs “exorbitant ‘administrative’ fees.”
Using last year’s tug-of-war between Express Scripts and Kroger to illustrate his point, Yost said, “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.”
Yost asserts that the defendants have violated Ohio’s Valentine Act, an antitrust law that prohibits price fixing, controlled sales, and other agreements that restrain trade.
According to the AG’s office, the Valentine Act is broader than the federal antitrust Sherman Act in that the Valentine Act prohibits market harms, not just consumer harms.
The “intent to harm the competitive marketplace in Ohio is sufficient” for the AG “to restrain or enjoin corrupt combinations” even if the desired effects have not yet been achieved, Yost stated in the lawsuit, before adding that the “Defendants’ actions have already caused substantial and serious harm to Ohio’s citizens.”
The lawsuit seeks to put a stop to the defendants’ “secret and anticompetitive conduct and strong-arm tactics,” as well as statutory fines and disgorgement of the defendants’ “ill-gotten proceeds.”
The defendants had not filed legal responses to the lawsuit as of Wednesday, Medical Economics reported.
Our Take: Yost didn’t mince words in his lawsuit, which his office says is the first to focus solely on PBMs (and not pharmacies or drug manufacturers) with regard to alleged price-fixing strategies.
Ohio’s lawsuit follows one that California AG Rob Bonta filed in January against Eli Lilly, Novo Nordisk, Sanofi, and PBMs CVS Caremark, Express Scripts, and OptumRx over insulin prices.
Several states have also filed lawsuits against — and settled with — PBMs for allegedly overcharging Medicaid programs for pharmacy services.
In addition, a number of states, the Federal Trade Commission, and Congress are all investigating PBM practices, including price spreading and clawbacks. We’ve written about this in Our Take a few times in the last couple of years.
If PBMs or their parent companies formed GPOs in response to increased public criticism (CVS Caremark and OptumRx also have GPOs — Zinc and Emisar Pharma Services, respectively), it makes us wonder what they might do in the face of the current scrutiny.
It feels as if some progress is finally being achieved in terms of lowering drug prices, with Lilly, Novo Nordisk, and Sanofi recently announcing planned price reductions for their insulin products — though the overall impact of those reductions won’t be evident for quite some time yet.
If states and the federal government keep hammering away at PBMs, eventually there could be some progress on that front as well.
With billions of dollars in profits at stake, PBMs, drugmakers, and insurers have spent years pointing the finger at each other for causing drug prices to soar, and the lack of transparency into their negotiations has shielded them. But the current investigations could change that.
We’ll keep you posted.
What else you need to know
A federal judge in Texas issued a ruling Thursday blocking the federal government from enforcing the Affordable Care Act’s mandates for preventive care. The mandates require insurers to cover certain preventive services and treatments with no cost share for plan members. According to the judge’s decision, insurers and employers do not have to comply with recommendations for coverage made by the U.S. Preventive Services Task Force and adopted after the ACA became law in 2010 because, the judge said, enforcing the recommendations is unlawful and violates the Constitution’s Appointment Clause; members of the task force are volunteers and are not appointed by the president or confirmed by the Senate. The judge’s decision, if it stands, could affect many types of screenings, including those for lung and skin cancer and HIV, as well as treatments such as PrEP to prevent HIV. The federal government is expected to appeal the ruling and ask for a stay while the appeal is in process. It is unlikely that changes in cost sharing for any of the affected services and treatments would be implemented until the new plan year at the soonest, and several insurer organizations stated after the ruling that health plans would continue to cover preventive services and treatments because they improve health and save lives.
The FDA approved Emergent BioSolutions’ Narcan (naloxone) nasal spray 4 mg as an over-the-counter emergency treatment for opioid overdose, making it the first naloxone product to be approved for use without a prescription. Emergent BioSolutions said in a press release it expects the product to be available on store shelves and at online retailers by late summer, after the company has made manufacturing changes to support nonprescription packaging and modified its supply chain. The firm did not specify an anticipated price. Although naloxone is already available without a prescription at some chain drugstores, a pharmacist must dispense it. Generic formulations of the drug were launched last year, including an Emergent BioSolutions-authorized version manufactured by Novartis’ Sandoz.
CVS Health completed its $8 billion acquisition of Signify Health, the companies announced Wednesday. The deal adds more than 10,000 clinicians to CVS Health’s network. Signify Health supports in-home care through the use of analytics and technology; during home visits, the clinicians evaluate patients’ medical and social situation and then connect them with additional services that may be needed. CVS Health CEO Karen Lynch said the acquisition advances the company’s value-based care strategy, noting that the expanded capabilities Signify Health adds will “bring us closer to the consumer.” According to Signify’s earnings report for 2022, the company serves 51 health plans throughout the U.S., primarily Medicare Advantage plans and managed Medicaid organizations. Signify will remain payer-agnostic despite being owned by CVS Health.
UnitedHealthcare will eliminate nearly 20% of its current prior authorizations (PAs), starting this summer and continuing through year-end, the insurer said in a news release. The code reductions will apply to most of the company’s commercial, Medicare Advantage, and Medicaid plans. UnitedHealthcare is also implementing a “gold card” program next year for eligible provider groups. Gold card providers will follow “a simple notification process for most procedures” instead of requesting a PA, the company said. The Wall Street Journal reported that Cigna and CVS Health’s Aetna have also taken steps to ease the PA burden for providers. Cigna reportedly has been reducing its PA requirements since 2020, whereas Aetna has been focusing on making the PA process more efficient through automation. CMS issued a proposed rule in December to streamline the PA process, and more than a dozen states, including Kansas last week, have introduced or passed bills to limit or change PA rules. Axios reported in January that as many as 42 states could introduce such bills this year, citing AHIP as the source.
Mark Bertolini, former Aetna chairman and CEO, is Oscar Health’s new CEO, effective April 3. Mario Schlosser, who co-founded the company in 2012 with Joshua Kushner and served as CEO, is transitioning to the role of president of technology; he will lead product and engineering. Schlosser noted in the announcement that he and Bertolini have worked closely for the past 18 months, with Bertolini serving as a strategic adviser. After CVS Health bought Aetna in 2018, Bertolini stayed on the board of directors until 2020. He most recently served as co-CEO of Bridgewater Associates, a role he took on in January 2022.
What we’re reading
Does Insulin Price Reduction Suggest a Path Forward for Lowering Drug Costs? JAMA, 3.29.23
Born On Third Base: Medicare Advantage Thrives On Subsidies, Not Better Care. Health Affairs Forefront, 3.27.23
Artificial Intelligence in Medicine. NEJM, 3.30.23