Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Vermont AG files suit against pharmacy benefit managers, (Jul 22, 2024)

By Jody Coultas, J.D.

The state alleges that pharmacy benefit managers and CVS have exploited their market power to drive up the prices of prescription drugs.

Vermont Attorney General Charity Clark has filed a lawsuit against the owner of Express Scripts and CVS, as well as nearly two dozen affiliated entities, for allegedly driving up prescription drug prices. The suit alleges these companies violated Vermont’s Consumer Protection Act by manipulating the marketplace and reducing access to certain prescription drugs, including lower-cost drugs, through a series of tactics with no transparency in their decision-making process (State of Vermont v. Evernorth Health, Inc.(Vt. Super. July 17, 2024)).

Pharmacy benefit managers (PBMs) are the “middlemen” who negotiate contracts with pharmaceutical manufacturers, insurance companies, and pharmacies, and dictate the cost of prescription drugs that consumers must pay. In Vermont, Evernorth and CVS are the largest pharmacy benefit managers and control approximately 95 percent of the commercial market in the state. As a result, they have a hand in nearly every prescription transaction and have near complete control over the pricing, dispensing, and reimbursement systems.

The suit alleges that prescription drug prices have increased exponentially in the last decade and these price increases are due, in part, to a complicated business model designed and promoted by pharmacy benefit managers. PBMs are incentivized to, and do, grant placement on their standard formularies to the prescription drugs with the largest payments from manufacturers and the highest list prices, while excluding lower-cost prescription drugs. They negotiate which prescription drugs are covered by health insurance plans and require that prescription drug manufacturers provide the pharmacy benefit managers with payments – dressed up as rebates and other fees – that the pharmacy benefit managers then pocket.

The PBMs also allegedly prevent patients from accessing lower-priced prescription drugs by excluding them from their formularies. As an example of this, a New York Times investigation recently revealed that, in Illinois, a woman with cancer paid hundreds of dollars more than she should have for her pain medication because a pharmacy benefit manager required her to use a more expensive version.

Further, the suit alleges that PBMs require patients – often with chronic or serious illnesses – to fill their prescriptions from the PBMs’ own in-house pharmacies and then restrict those patients’ access to only the most expensive prescription drugs. These requirements allegedly harm local pharmacies and result in higher prices for consumers.

“While the pharmacy benefit managers named in our lawsuit claim they perform their services on behalf of their clients and patients to lower prescription drug prices and promote patient health, that is just not true,” said Attorney General Clark. “Instead, they have distorted the market to line their own pockets at the expense of Vermonters. My office is suing to bring transparency to prescription drug pricing and to hold these pharmacy benefit managers accountable.”

Similar claims. Other states that have brought lawsuits over PBMs' business practices include Hawaii, California, Ohio and Kentucky. The FTC is expected to file suit after releasing a report concerning the impact that PBMs have on the accessibility and cost of prescription drugs. The report, Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies, detailed how the market for pharmacy management services has become both highly concentrated and vertically integrated and how this has led to significant power and influence for PBMs. The FTC found that the largest PBMs can exercise control over price and make critical decisions over access to life-saving medications. The FTC also found that vertically integrated PBMs can self-preference their own affiliated businesses and that they possess the leverage to enter into contractual terms that can disadvantage unaffiliated pharmacies. The FTC also found evidence of efforts to limit access to generic alternatives.

Companies: Evernorth Health, Inc.; Express Scripts, Inc.; Express Scripts Administrators, LLC; Medco Health Solutions, Inc.; ESI Mail Pharmacy Service, Inc.; Express Scripts Pharmacy, Inc.; Ascent Health Services LLC; Accredo Health Group, Inc.; CVS Health Corporation; CVS Pharmacy, Inc.; Caremark Rx, LLC; Caremark PCS Health, LLC; Caremark, LLC; Zinc Health Ventures, LLC; Zinc Health Services, L.L.C.; Caremark Arizona Specialty Pharmacy, L.L.C.; Caremark California Specialty Pharmacy, L.L.C.; Caremark Florida Specialty Pharmacy, LLC; Caremark Illinois Specialty Pharmacy, LLC; Caremark Kansas Specialty Pharmacy, LLC; Caremark Massachusetts Specialty Pharmacy, LLC; Caremark Michigan Specialty Pharmacy, LLC; Caremark New Jersey Specialty Pharmacy, LLC; Caremark North Carolina Specialty Pharmacy, LLC; Caremark Tennessee Specialty Pharmacy, LLC

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