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Life Health > Health Insurance

Drugmakers get DOJ inquiry on pharmacy management contracts

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(Bloomberg) — Merck & Co. (NYSE:MRK), Johnson & Johnson (NYSE:JNJ), and Endo International PLC said in securities filings this month that they have received demands for information from the U.S. Attorney’s Office for the Southern District of New York related to their contracts with pharmacy benefit managers.

The companies provided few details in their disclosures, but at least part of the investigation appears to involve migraine drugs.

Merck, in a filing Monday, said it had received a civil investigative demand for information about “contracts with, services from and payments to pharmacy benefit managers,” or PBMs, related to Maxalt, a migraine drug, and the erectile dysfunction drug Levitra. Endo, in a May 6 filing, said the civil demand it received involved contracts with PBMs related to the migraine drug Frova.

J&J said in a filing Tuesday that it received a civil investigative demand in March 2016 in connection with an investigation under the False Claims Act. The company didn’t name specific drugs, and said the inquiry related to “contractual relationships with pharmacy benefit managers.” The False Claims Act is a federal law that penalizes companies or individuals who defraud the government.

PBMs’ role

The J&J and Merck inquiries are for 2006 onwards. The drug company filings don’t mention any pharmacy benefit managers by name.

CVS Health Corp. (NYSE:CVS), the U.S.’s second-largest drug benefit manager by market share, said in an e-mail that it has not received a similar inquiry. Express Scripts Holding Co. (Nasdaq:ESRX), the largest U.S. PBM, declined to comment.

James Margolin, a spokesman for the U.S. Attorney’s Office, declined to comment.

Pharmacy benefit managers contract with employers and health insurers to administer drug benefits that are part of health coverage. They develop lists of covered therapies that are included in plans, and negotiate discounts on brand-name treatments with drugmakers. PBMs say they save the system money, though critics counter that it’s hard to know how much they really reduce costs because their operations are opaque.

Spokesmen from Merck and J&J said they were cooperating with the inquiry and declined to comment beyond the filings. Endo could not immediately be reached for comment.

See also:

CVS makes exclusive deal to cover Amgen’s cholesterol drug

Walgreens expands drugstore empire in $9.4 billion Rite Aid deal


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