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UnitedHealth, OptumRx sued by independent pharmacy over ‘unconscionable’ fees

Osterhaus Pharmacy in Iowa is also behind a similar suit against CVS Caremark.

Dive Brief:

  • UnitedHealth and its pharmacy benefit manager OptumRx are being sued by an independent pharmacy for allegedly strong-arming pharmacies into agreeing to “unconscionable” performance-based fees, threatening their financial health.

  • Those fees, called DIR or direct remuneration fees, allow PBMs to retroactively adjust how much pharmacies are reimbursed based on their quality performance. Osterhaus Pharmacy in Iowa is suing OptumRx for allegedly coercing the pharmacies to accept one-sided contracts including the fees — which at times force pharmacies to dispense prescriptions at a loss — or lose access to the millions of beneficiaries with pharmacy benefits through the PBM.

  • The suit seeks class action status to include thousands of independent pharmacies with similar contracts with OptumRx. Osterhaus brought a similar suit against CVS in September.

Dive Insight:

As 2023 draws to a close, pressure has been heating up on PBMs over their business practices, including from Congress, the CMS and antitrust agencies.

The drug middlemen are also facing lawsuits from independent pharmacies arguing PBMs reduce reimbursement to increase profits and shunt business to in-house pharmacies.

The lawsuit filed Monday alleges OptumRx sets performance metrics and calculates DIR fees, then forces pharmacies to pay the fees to remain in its network for Medicare Part D, Medicare’s prescription drug benefit. The fees are unfair, given they rely in part on metrics that pharmacies don’t control like patient outcomes or which drugs a doctor chooses to prescribe, the lawsuit says.

“Many of the performance criteria established by OptumRx make little or no sense for pharmacies,” the lawsuit argues, calling the fees “nonsensical” and “arbitrary.”

If independent pharmacies don’t accept the fees, they would be forced out of network with OptumRx and lose a valuable revenue stream. OptumRx contracts with plans covering almost one-quarter of Medicare beneficiaries in PBM-affiliated plans, according to a Drug Channels report cited in the suit.

“To serve the millions of beneficiaries enrolled in OptumRx‐affiliated Plans, Independents generally have no practical choice but to participate in the OptumRx network,” the lawsuit says.

The National Community Pharmacists Association, which represents independent pharmacies, cheered the lawsuit on Tuesday, with NCPA CEO Douglas Hoey calling PBMs “21st century robber barons” in a statement.

Yet, OptumRx is “proud” of its partnerships with community pharmacies, a spokesperson for the PBM said.

“This lawsuit is without merit and we will defend against these allegations,” the spokesperson told Healthcare Dive in a statement.

The largest U.S. PBMs — OptumRx, CVS Caremark and Cigna’s Express Scripts — control 80% of prescriptions in the country. All three impose DIR fees on independent pharmacies as a condition of obtaining reimbursement, according to Osterhaus’ lawsuit.

And DIR fees have been soaring. From 2010 to 2020, the volume of the fees grew more than 1,000 times, according to the CMS.

In 2021, DIR fees increased an additional 33% from 2020, to reach $12.6 billion, according to the Medicare Payment Advisory Commission, which advises Congress on Medicare.

The CMS has taken steps to tamp down on PBMs hitting pharmacies with the fees after the point of sale. Last year, regulators finalized a rule to prevent payers in Medicare’s prescription drug benefit from retroactively levying performance-based adjustment fees. The rule does allow payers to adjust reimbursement based on quality at the point of sale.

The CMS sent a letter to PBMs on Friday urging them to consider enacting more generous payment arrangements with pharmacies before the regulation kicks in on Jan. 1.

“We continue to hear urgent concerns from pharmacies, and we strongly encourage Part D plan sponsors and their PBMs to make necessary cash flow arrangements with network pharmacies in preparation for these upcoming changes,” the CMS wrote.

Independent pharmacies have been closing across the U.S. but especially in rural areas due to increased financial pressures. Currently, almost half of U.S. counties are considered pharmacy deserts as a result of the closures, according to an analysis by drug coupon company GoodRx.

PBMs’ impact on independent pharmacies has been one criticism aired in Congress as lawmakers get serious about passing legislation to reform the middlemen’s business practices.

Earlier this month, the House passed a bipartisan bill that would ban PBMs from spread pricing, wherein they charge a payer more for a drug than it costs to reimburse the pharmacy, in Medicaid. The bill would also require PBMs to disclose rebates, fees and other forms of compensation to clients.

Reporter: Rebecca Pifer, Senior Reporter



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