Volume 10Number 12
Wednesday, March 24, 2004
Antitrust Scrutiny Likely to
Increase for PBM
Speaking at a conference on "Minimizing Legal Risk in Pharmaceutical Benefit Management" in Washington, D.C., March 22, Bruce D. Sokler, a partner with the Washington, D.C. office of Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., said mail order is an "increasingly important and controversial" issue among payers, providers, retail pharmacies, pharmaceutical benefit managers, and employers.
So far, private plaintiffs such as pharmacies, pharmacy trade associations, and labor unions have challenged certain mail-order related activities--including contractual provisions preventing retail pharmacies from supplying 90-day maintenance medications for a single copayment--as anticompetitive under state and federal laws.
And, Sokler said, although private litigation against PBMs still is in its infancy, a federal court in Pennsylvania recently allowed a proposed antitrust class action against AdvancePCS to go forward.
The lawsuit alleges AdvancePCS, acting as an agent for health plan sponsors in dealing with retail pharmacies, improperly negotiates and fixes reimbursement levels and limits the ability of retail pharmacies to compete on a level playing field with the PBM's mail-order pharmacies (10 HPPR 267, 3/10/04).
Some of the allegedly unfair tactics include providing three-month maintenance prescriptions only to mail-order pharmacies owned by the PBMs and setting artificially low prices for reimbursing retail pharmacies.
AdvancePCS moved to dismiss the lawsuit on the grounds that it failed to state an antitrust injury, but the court found that the plaintiffs had sufficiently pleaded an injury under the antitrust laws.
"I, at least, found it surprising that this case got as much traction as it already has," Sokler said, noting that the next wave of litigation could involve payers as defendants, not just the PBMs as purchasing agents for the payers.
"Anything the FTC can do, the states can do better," he said. "Many state enforcers are there to pick up the cudgel and whip things into shape," he said.
FTC, he said, erred in allowing the merger of PBM giants AdvancePCS and Caremark to go through. That merger leaves only three large national PBMs in the market. The other two PBMs are Express Scripts and Medco Health Solutions.
"They mistakenly thought that three competitors [in the PBM arena] are enough," he said. And, he said, contrary to the commission's conclusion in the AdvancePCS/Caremark merger, "smaller PBMs really can't constrain the potential effect of the three big PBMs."
In addition to antitrust lawsuits attacking PBM mail-order requirements, there likely also will be attacks on PBMs' tying arrangements, Balto said. A tying arrangement, for example, involves requiring pharmacies to participate in the PBM's non-Medicare plan as a condition of participating in the PBM's Medicare plan. "If litigation isn't successful at solving these [antitrust] problems," Balto said, "the next step will be Congress."
But Seth G. Silber, assistant to the director of FTC's Bureau of Competition, took issue with Balto's analysis of FTC merger enforcement.
"The fact that an industry is moderately or highly concentrated does not necessarily mean anticompetitive effects," he said. "We focused our investigation on the likelihood of harm to large employers." In its review, the commission found sufficient competition exists for large employers to prevent the likelihood of anticompetitive effects, he said.
And, Silber said, on the issue of mail-order pharmacies, FTC has just begun its congressionally mandated study into the prevalence of practices such as generic drug substitution, therapeutic interchange, and repackaging of drugs between mail-order pharmacies owned by PBMs and non-PBM owned mail order outlets and retail pharmacies.
"We will send out requests for data and documents in the near future," he said. FTC's report to Congress on PBMs and potential conflicts of interest is due by June 2006.
Copyright © 2004, The Bureau of National Affairs, Inc.