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Next Tactic in Battle to Lower Drug Prices: Litigation?

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Two retail pharmacy giants have been sued in separate class action lawsuits for their alleged role in soaring prescription drug prices—an indication that plaintiffs lawyers may be assuming a role traditionally left to legislators.

In complaints filed on Monday and Wednesday, consumers accused CVS Health of Woonsocket, Rhode Island, and Walgreens Boots Alliance Inc. of Deerfield, Illinois, respectively, of colluding with pharmacy benefit managers to sell certain generic drugs at a higher cost if they are purchased with insurance.

Pharmacy benefit managers, or PBMs, are middlemen in the pharmaceutical industry that process prescriptions for the insurance companies that pay for the drugs. In the suit against CVS, filed in the federal court in Rhode Island, the lead plaintiff, Megan Schultz, claims she was charged $165.68 for a generic drug under her insurance that would have cost only $92 had she paid cash for it without using insurance. That’s because, according to the complaint, CVS owns a PBM that determines which pharmacies are in a network to a cut of the drug sales.

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The suit against Walgreens, filed in U.S. District Court for the Northern District of Illinois, is similar, and also alleges that the pharmacy shares co-payments collected from patients with the PBMs, in what is alleged to be a “clawback scheme.” The named plaintiff in that case is David Grabstald.

The suits allege violations of the Racketeer Influenced and Corrupt Organizations and Employee Retirement Income Security acts, as well as state consumer protection laws. They do not specify the amount of damages sought. Both companies have denied the charges. A Walgreens spokesman said the complaint “lacks merit,” while a CVS representative described the allegations “built on a false premise” and “completely without merit.”

Pills (Image: Allison Bell/TA)

(Image: Allison Bell/TA)

The most recent suits were brought by Seattle-based class action firm Hagens Berman Sobol Shapiro. Other plaintiffs firms that have filed complaints against PBMs since January include Constantine Cannon, New Jersey-based Critchley, Kinum & DeNoia, St. Louis firm Fox Galvin and The Maul Firm of Brooklyn. PBMs have faced a growing number of lawsuits over the last couple of years, in large part because of an “increased recognition that the health care intermediaries are raising the costs of drugs rather than fulfilling their responsibilities of controlling drug prices,” said David Balto, former policy director at the Federal Trade Commission and a Washington, D.C., attorney in private practice who runs the Coalition to Protect Patient Choice, a group that advocates for pharmacy benefit manager reform.

In addition, PBMs are the least regulated aspect of the health care market “by a breathtaking amount,” which leads to “a lot of opportunities for either deception or anti-competitive conduct,” Balto said. Not including the two recent filings against CVS and Walgreens, there have been at least four other federal lawsuits targeting PBMs in 2017 alone.

A suit filed in March in the U.S. District Court for the District of New Jersey accuses leading insulin makers and several PBMs of colluding to drive up the costs of the lifesaving drugs. Another filed in June in the federal court in Minnesota accuses three PBMs of contributing to the steep price increases of anti-allergy medicine EpiPen.

The suits against PBMs for their alleged role in the price hikes are pending, meaning it is unknown whether litigation, namely a big-dollar verdict or settlement, could meaningfully impact drug prices.

On the legislative side, proposals to address the issue are just that—proposals. Last month, the Democrats, as part of the party’s new “Better Deal” economic agenda, proposed a new “price gouging enforcer” who would be confirmed by the U.S. Senate and direct a new agency designed to curb exorbitant price hikes.

Republicans under the Trump administration likewise have expressed concern about the exorbitant price increases for some medications. Health care law experts say they will likely attack the matter by trying to expedite approval of generic drugs, a task that would require the involvement of Congress and other U.S. Department of Health & Human Services agencies besides the U.S. Food and Drug Administration.

“The government is really slow to come to the task here, and unfortunately, private law firms are picking up where the government has dropped the ball,” Balto said.

— Read States Take Aim at Surprise ER Bills on ThinkAdvisor.


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