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Shining light on the PBMs 

Suit says drug middlemen drive up prices for their own benefit.

click to enlarge Reporter Aug 19, 2004
  • Reporter Aug 19, 2004
A Little Rock law firm, Whetstone & Spears, has filed what it says is a landmark lawsuit alleging that pharmacy benefit management companies (PBMs) are engaged in deceptive practices for their own profit and drive up the cost of prescription drugs in the process. PBMs act as middlemen between drug companies and insurance carriers. They purport to save on drug costs through volume buying. The lawsuit says that PBMs have instead increased their own profits by keeping rebates and recommending more expensive drugs than needed. Don Spears, one of the plaintiff's attorneys, said, "This scam has been going on for years. It is the single largest contributor to high prescription-drug cost." The plaintiff in the case is the Hot Spring County Solid Waste Authority, but Whetstone & Spears will ask that the suit be certified a class-action lawsuit on behalf of all Arkansans who've allegedly suffered from deceptive practices by PBMs. The class-action designation is the only way the suit can be financially feasible, Bud Whetstone, another plaintiff's attorney, said. The firm knew of only one other substantially similar lawsuit. That one is in California, and has not been decided. The principal defendants in the case are three large PBMs - Caremark, Inc., Advance PCS and Medco Health Prescription Solutions. United Healthcare, the insurance carrier for the employees of Hot Spring County Solid Waste Authority, and Hatcher Insurance Agency, the local agency through which the insurance coverage was purchased, also are named as defendants. Robert L. Henry III of Little Rock, an attorney for Caremark and Advance PCS, said allegations of deceptive practices by his clients were "absolutely untrue." The suit was filed in Hot Spring Circuit Court, considered a friendly venue for plaintiffs, but the defense succeeded in having it transferred to federal court in Fort Smith. Whetstone & Spears is seeking to have it transferred back to Hot Spring Circuit Court. Federal court is considered a better court for defendants in this type of lawsuit. Eventually, the plaintiff's attorneys will ask for a class certification hearing. PBMs are hired by employers and health insurers to manage drug benefits, negotiate discounts with pharmacies and get rebates from drug manufacturers. All this is supposed to be done with the idea of keeping drug prices down for the ultimate consumer. The PBMs have been largely invisible to the general public, but are drawing increasing attention from private attorneys and government regulators. Twenty states are investigating the practices of Express Scripts, Inc., a Missouri-based firm that manages prescription drug benefits for some 50 million Americans. Though consumers generally are ignorant of the PBMs, the drug manufacturers and insurance carriers that contract with them know of their existence. Joseph W. Woodson Jr., another plaintiff's attorney, said the lawsuit might reveal that insurance carriers and drug manufacturers have a financial interest in the PBMs. "We're going to shine light on them," Whetstone said.
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