CA Independent Pharmacies Sue Major PBM Over Illegal Price Discrimination and Below Cost Reimbursements
Pharmacies Allege OptumRx Knowingly Paid Them Less Than Large Retail Chain Pharmacies and Misused Patient Information
The newest litigation against a major pharmacy benefit manager comes from a most likely source: their small business victims. Unwilling to tolerate the low reimbursements which threaten to drive them out of business, more than 30 California independent pharmacies have sued pharmacy benefit manager (PBM) OptumRx, a division of UnitedHealth Group, charging the company violated California laws by paying them less than their acquisition costs and illegally steering their patients to Optum’s own mail-order pharmacy.
The lawsuit alleges that OptumRx ignored California law, unlawfully paid California pharmacies substantially less than it paid large chain retail pharmacies - like CVS or Walgreens - and its own mail-order pharmacy for the same prescriptions. The lawsuit further alleges that OptumRx deliberately reimbursed these independent California pharmacies below their wholesale cost to acquire generic prescription drugs necessary for their patients.
PBMs administer the prescription drug portion of health insurance and self-insured plans, acting as a middleman between the insurance plan and the pharmacist. Over the last 20 years, these companies have accumulated immense, unregulated power - the three largest PBMs controlling over 80% of the healthcare market - and have utilized that power to increase prescription drug costs, decrease competition, and restrict patient choice.
Paying independent pharmacies less than their acquisition and dispensing costs is likely one reason why OptumRx is the most profitable component of UnitedHealth Group; the world’s largest health insurance company, with over $225 billion in annual revenues.
The California pharmacies in the lawsuit allege that:
PBMs dictate reimbursements without notice or negotiation, and the dictated rates are often unrelated to the pharmacies’ actual wholesale costs to acquire the drugs for their patients.
Sometimes for a prescription filled by the pharmacy, Optum charges the patient’s health care plan the brand price while paying pharmacies the lower generic price for each prescription. This allows Optum to collect huge profits on prescriptions merely by changing their classification.
Optum built a wall of secrecy around its conduct by forcing network pharmacies into confidentiality agreements that conceal the truth - specifically how much Optum is paid by insurance plans for prescriptions, how much Optum receives in rebates from drug manufacturers, and how little Optum pays to pharmacies who actually serve the patients and dispense the drugs.
Optum illegally takes patient information it receives from independent pharmacies through the claims process and uses it to steer those customers to Optum’s own mail-order pharmacy.
The survival of independent pharmacies in the U.S. healthcare system is seriously threatened by the unethical, predatory business practices of PBMs. This lawsuit seeks to break this wall of secrecy and hold Optum accountable.
The California pharmacies are represented by Mark Cuker and Neal Jacobs of the Jacobs Law Group, and the California firm of Barrack, Rodos, and Bacine. Cuker and Jacobs also represent over 500 independent pharmacies in lawsuits pending in Pennsylvania and Illinois.
For more information about the Independent Pharmacies vs. PBM lawsuits, contact Mark Cuker at (215) 531-8512 or 215-569-9701.
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Mark R Cuker, Esq
Jacobs Law Group
email us here
Cigna Health & Life Insurance Co. convinced a federal judge in Connecticut to trim a proposed class action claiming the insurer schemed with pharmacy benefit manager OptumRx Inc. to overcharge health plan participants for prescription drugs.
Judge Jeffrey Alker Meyer of the U.S. District Court for the District of Connecticut on Monday dismissed Billy Ray Blocker’s state law claims alleging breach of contract and breach of the implied covenant of good faith and fair dealing. Cigna isn’t a party to Blocker’s health plan, which is self-funded by a county government in suburban Atlanta, and there’s no indication Cigna assumed any obligations under the health plans between Blocker and the county, Meyer said.
Meyer’s ruling addressed only two of the lawsuit’s 10 counts.
The lawsuit accuses Cigna and other defendants of scheming to overcharge people for prescription drugs, sometimes by as much as 300%. The lawsuit claims that when a given prescription drug costs less than a patient’s copayment amount, the insurer “claws back” the difference through an improper scheme kept hidden from patients. This sometimes causes insured patients to pay more for drugs than they would without insurance, with pharmacists contractually prohibited from telling patients this information, according to the lawsuit.
The lawsuit was allowed to proceed over Cigna’s motion to dismiss in 2018.
Other insurers have been accused of similar violations. UnitedHealth Group Inc. defeated a clawback lawsuit in 2017. Humana entered into a confidential settlement in 2018, and cases against CVS Health Corp. and Walgreens Boots Alliance were voluntarily dismissed.
The health plan participants are represented by Zimmerman Reed PLLP; Whitfield, Bryson & Mason LLP; Keller Rohrback LLP; Izard, Kindall & Raabe LLP; Scott & Scott LLP; Motley Rice LLC; Sarraf Gentile LLP; and Lockridge, Grindal, Nauen PLLP.
Cigna is represented by Morgan, Lewis & Bockius LLP.
The case is Negron v. Cigna Health & Life Ins. Co., 2020 BL 331303, D. Conn., No. 3:16-cv-01702, 8/31/20.
To contact the reporter on this story: Jacklyn Wille in Washington at firstname.lastname@example.org
Specialty Pharmacy Continuum
Matthew Gibbs, PharmD
I worked as a pharmacy intern and technician for six years in a large retail chain pharmacy. I admired the relationship the pharmacist I worked under, let’s call her Mary, had with her patients and the unbelievable amount of trust they put in her advice. Mary’s acuity with patients underscored the value that pharmacists—the highest-educated health care professionals on medication topics—bring to the health care team. Indeed, they are uniquely trained to help providers and patients deal with complex issues involving medication management.
I aspired to be a respected resource for my community when I entered pharmacy school, but by the time I graduated in the late 1990s, a major shift in the industry already had taken hold.
I noticed Mary and other pharmacists scrambling on the phone with insurance carriers, calling doctors’ offices to get prescriptions changed to comply with their patients’ formulary. I saw Mary’s relationship with her patients turn from a helpful exchange of medical information to managing copay charges and trying to explain why the price of a medication kept changing each time they went to refill.
Mary is not alone. Pharmacists are reporting higher workloads, more stress and less overall job satisfaction, as a recent survey showed (bit.ly/2ZKgQb8).
Compounding this issue, the largest pharmacy benefit managers (PBMs) now exclude hundreds of products. Brand-name medications are particularly prone to such exclusions: Their removal increased by as much as 63% in 2020, according to CoverMyMeds’ 2020 Medication Access Report (prn.to/3f6nz5P). Moreover, nearly 70% of patients report having made personal or financial sacrifices to afford prescriptions, and 30% say they’ve had to abandon a prescription due to cost, the CoverMyMeds report noted. That abandonment rate is even higher when out-of-pocket costs exceed $100 (Figure). Additionally, formulary exclusions of brand-name medications continue to increase. These barriers to care impede a pharmacist’s ability to play the role they are trained for and limit where they can effect meaningful change.
The Columbus Dispatch
The bipartisan Joint Medicaid Oversight Committee wanted answers.
And Ohio Medicaid Director Maureen Corcoran was summoned to provide them during a special meeting Wednesday in the Statehouse.
After 90 minutes of testimony, leading members of the panel still weren’t satisfied.
Chairman Dave Burke, GOP senator from Marysville who’s also a pharmacist, said a “serious trust issue” remains with Corcoran and the department, which provides health-care coverage for 3 million poor and disabled Ohioans.
Among those issues:
‒ Corcoran asserted that a July 1 deadline for a provisional single pharmacy benefit manager to handle the state’s $3 billion-a-year prescription drug program was merely a benchmark to inform the legislature how the project was going. That was news to Burke and others, who regarded the July 1 date included in the bill passed last year as a deadline for actually implementing the new setup.
“That was a go-live date, not a let’s-see-how-we’re-doing date,” Burke said.
‒ She said authority granted by legislators to pay more starting in early 2019 to pharmacies that provide health-care service beyond dispensing drugs won’t take effect until January of 2021. The agency views the measure OK’d by lawmakers as merely “permissive” and not mandatory.
‒ Corcoran revealed that $100 million allocated starting this past Jan. 1 by the legislature to bolster pharmacies with a high caseload of Medicaid recipients has been put on indefinite hold because of budget cuts ordered by Gov. Mike DeWine.
Burke was almost sputtering as he searched for words to describe the department’s lack of action to carry out items approved by the legislature, including the state budget.
“We passed the bill in its entirety. The governor signed the bill in its entirety. So either that means something in its entirety or it doesn’t,” he said.
“We have to stand up. I mean, we do pass the laws and these laws have meaning. And you can’t just pick the laws you like and implement those and say, well, that’s legislative authority, and the ones you don’t like you never implement and say, well, we’re getting there, we have a budget issue or it’s COVID or they ran out of cupcakes in the vending machine.”
‒ The director was peppered with questions about the department’s request for proposals for the single PBM. Corcoran responded to some but said she wasn’t prepared to answer others.
Sen. Bill Coley, a Republican lawyer from southwest Ohio, said the proposal has such loose language he “could drive a truck” through the loopholes.
“We’re going to get hosed on this thing. I just really see it,” he said.
Corcoran surprised the oversight panel by saying yet another contract will be signed with an entity — possibly another PBM — that will have the job of monitoring the single PBM.
The gathering was called after an Aug. 2 Dispatch story detailed the mystery surrounding a 2019 report by a Medicaid consultant hired to look at state reforms designed to rein in PBMs rolling up huge profits at the state’s — and Ohio pharmacies’ — expense.
The Dispatch pointed out how top department officials — including Corcoran herself — denied for several months that any earlier versions of the consultant’s report existed. They finally fulfilled a Dispatch public records request for such material last month, more than a year after it was filed.
The department’s spokesman also had denied for three months that the consultant’s report had been submitted. When confronted with that falsehood, Corcoran told The Dispatch that the original report dated June 28, 2019, “reflected when the (consultant’s) analytic work was completed, not when the final report was produced and delivered to us.”
She repeated that defense Wednesday after Burke began the meeting by reading a large portion of the story out loud. But as she did then, Corcoran did not address her false denials that an earlier versions of the report existed.
When the study — plus additional analytical material added by department officials — was finally released at the end of September, so much material had been removed that it was down to 20 pages from the 27 in the June original.
Several lawmakers expressed fury because they feel they were misled by Medicaid officials about the study as well. The oversight panel is made up of a bipartisan mix of five senators and five representatives. Continue Reading
GPhA APPLAUDS GOVERNOR KEMP FOR SIGNING FIRST-IN-NATION PBM LEGISLATION PROTECTING PATIENT CHOICE, ACCESS TO THEIR PREFERRED PHARMACY
Georgia Pharmacy Association
Monetary Penalties for Steering Patients to PBM-Owned Pharmacies, Prohibiting Pharmacy Drug Reimbursements Based on Patient Outcomes and Public Availability of Drug Pricing Included in New Laws
SANDY SPRINGS, GA (August 6, 2020) – In a culmination of General Assembly efforts to reign in practices of pharmacy benefit managers (PBMs) and their affiliated pharmacies, Governor Brian Kemp signed a new package of bills into law that would protect patients’ choice of pharmacy and increase public access to drug pricing information by requiring online drug price reporting.
“This legislation represents one of the most comprehensive and forward-thinking pieces of legislation in the country and will help preserve patients’ right to choose their pharmacy, protect them and their providers from unscrupulous practices and save taxpayers money,” said Georgia Pharmacy Association CEO Bob Coleman. “GPhA and our members are grateful to Governor Kemp, Lt. Governor Duncan, Speaker Ralston, Representatives Knight, Cooper, and Hatchett as well as Senator Burke for their
leadership and commitment to Georgia’s patients and providers.”
The new law strengthens already groundbreaking state legislation passed in 2019 designed to rein in the unchecked power PBMs have exhibited over patients and providers. Highlights of the newly-enacted laws include:
• HB 918: Strengthens existing anti-steering provisions which prohibit pharmacies affiliated with PBMs from filling and billing for prescriptions illegally referred by PBM affiliates and applies these restrictions to pharmacies affiliated with Medicaid managed care companies. HB 918 also strengthens the Pharmacy Audit Bill of Rights, significantly curtailing PBM audit practices that often disrupt patient care and can result in steep financial penalties for pharmacies without right of appeal.
• HB 946 & SB 313: Representing a comprehensive rewrite of Georgia’s PBM code section, these companion bills strengthen oversight and enforcement of PBMs including innovative first-in-the-nation provisions such as reporting of drugs paid 10% above and 10% below National Average Drug Acquisition Cost (NADAC) every four months and making reports publicly available online; and prohibits PBMs from tying a pharmacy’s drug reimbursement to a patient’s health outcomes. The bills also require PBMs to offer drug coverage plans that do not include spread pricing and plans that allow plan sponsors to receive 100% of rebates negotiated by PBMs and imposes a first of its kind PBM surcharge when PBMs engage in certain practices.
In recent years PBMs have come under close, critical scrutiny for their “middlemen” role between the health plan sponsor, the patient and the provider. Iron-clad contracts between PBMs, pharmacy provides and plan payers including state governments, have allowed PBMs to operate with little oversight and kept many practices - including the use of gag clauses, spread pricing and holding onto to part or all of drug maker rebates instead of passing them on to the plan or patient – secret until recently.
The State of Georgia has become one of the leaders of state-level, groundbreaking PBM reform and was the first state to successfully legislate and regulate the steering of patients away from their own pharmacies to PBM-owned pharmacies.
Georgia Pharmacy Association (GPhA) represents Georgia’s pharmacists, pharmacy technicians, and advocates on behalf of their patients. GPhA has been actively involved in the enhancement of the practice of pharmacy and pharmacy patient care since 1875.
Click here for an official copy of GPhA's press release
Click here for a breakdown of HB 946 & SB 313
The National Law Review
On July 24, 2020, President Trump signed four Executive Orders related to drug pricing that direct the Secretary of Health and Human Services (HHS) to take a number of actions aimed at lowering prescription drug prices. These HHS actions generally are not expected to apply directly to employer-sponsored group health plans. However, the Executive Order on “Lowering Prices for Patients by Eliminating Kickbacks to Middlemen” (the Order) could have an indirect impact on such plans, or provide an indication of things to come.
The Order directs HHS to finalize a proposed rule that would (1) remove safe harbor protections for, among other things, remuneration that drug manufacturers provide to health plan sponsors, pharmacies or pharmacy benefit managers (PBMs) in operating the Medicare Part D program and Medicaid managed care organizations, and (2) establish a new safe harbor that would permit the same entities to apply discounts at the patient’s point of sale in order to lower participant out-of-pocket costs.
As mentioned, the proposed rule applies to Medicare Part D and Medicaid managed care organizations, and does not directly impact employer-sponsored pharmacy benefit plans. However, given the impact on PBMs, if the proposed rule is finalized, it could impact how rebates are offered in the employer marketplace. In addition, although changes to pharmacy rebates for employer-sponsored pharmacy benefit plans would require federal legislation, employers should monitor Congress’ actions and be prepared for changes that impact rebates or the marketplace.
Finally, note that the Order directs HHS to confirm that the proposed rule will not increase federal spending, Medicare beneficiary premiums or out-of-pocket costs for patients. These conditions make it significantly less likely that the proposed rule will take effect. Prior to the Order, HHS had withdrawn the proposed rule following a Congressional Budget Office finding that it was expected to cost taxpayers $177 billion over the next decade and would have raised premiums under Medicare Part D.
The other Executive Orders do not directly impact employer-sponsored health plans, but aim to change the prescription drug marketplace, and could have a far-reaching impact. These Orders aim to allow the importation of drugs from other countries at favorable prices, make EpiPens and insulin more affordable for patients of community-based health centers, and apply “most favored nation” status for the United States, which would tie the prices that Medicare pays for drugs to the prices other countries pay. It likely will take considerable time for HHS to implement these initiatives.
President Donald Trump announced new policies Friday aimed at lowering prescription drug prices under Medicare by linking them to rates paid in other countries and allowing Americans to buy medication imported from Canada.
The changes are included in executive orders that come as Trump seeks to repair his standing on health-care issues, particularly with senior voters. Polls have shown sentiment is souring over his handling of the coronavirus pandemic and efforts to eliminate the Affordable Care Act without having a ready replacement.
Related: How states could take the lead on drug price reform
The president also announced a new policy to require federally qualified health centers to pass discounts they receive on insulin and EpiPens directly to their patients, and a drug rebate rule that removes legal shields for reimbursements paid by drugmakers to middlemen and insurers.
The orders “represent the most far-reaching prescription drug reforms ever issued by a president,” Trump said at an event in Washington. They will “completely restructure” the prescription-drug market, he said.
Democrats and drugmakers quickly pushed back. House Speaker Nancy Pelosi said the moves “take no real action” to lower prices and will put Medicare beneficiaries at risk of higher premiums. Industry lobbyist Stephen Ubl, head of the Pharmaceutical Research and Manufacturers of America, called the pricing policy “radical and dangerous.”
The order tying prescription-drug prices to international benchmarks, which Trump described as the “most favored nations” clause, won’t go into effect until Aug. 24 to give drugmakers time to come up with alternative measures for lowering costs, Trump said. Several top pharmaceutical companies have requested a meeting on the issue, which will be held on Tuesday.
$17 billion savingsThe international drug price rule is the only policy backed by the administration that would boost the government’s ability to decide what it will pay for medications. Health officials estimate the policy change proposed by Trump will save Medicare $17 billion in the first five years. In 2018, Medicare spent $335 billion on prescription drugs, a 2.5% rise from the previous year.
“We pay for all of the resources and all of the development and foreign countries pay absolutely nothing,” Trump said. “Americans are funding the enormous cost of drug resource for the entire planet.”
Trump’s plan to import cheaper drugs from Canada is less likely to be effective. Canada’s pharmaceutical market is likely not big enough to satisfy the U.S. demand for drugs.
Secretary of Health and Human Services Alex Azar said that personal importation of insulin would be allowed, after not allowed last year under the previous importation proposal.
Rebate ruleTrump also revived his drug rebate rule, stripping legal shields for reimbursements paid by drugmakers to middlemen and insurance plans providing coverage through Medicare’s Part D drug program or Medicaid.
Those payments create incentives for higher drug prices, drug companies have argued, because they push companies to raise prices in order to meet discount demands by drug middlemen. Instead of middlemen receiving discounts based on the price of drugs, they’d get a fixed fee under the policy change.
The pharmaceutical industry supported the plan, which was one reason for its initial demise. Trump was also apparently concerned in the past that the policy would raise insurance premiums. Lawmakers criticized the rule for its massive price tag too. It would cost taxpayers $177 billion over a decade, according to the Congressional Budget Office.
Jon Conradi, an outside spokesman for the Campaign for Sustainable Rx Pricing, which represents insurers, pharmacy benefit managers, and hospitals, lambasted Trump for bringing it back to the table.
“A reboot of the Rebate Rule, after the administration’s own admission it would increase premiums on Medicare beneficiaries and cost taxpayers hundreds of billions, would be a stunning cave to Big Pharma at the expense of American seniors and taxpayers,” Conradi said before the executive order was announced.
Discount programThe plan to use the federal drug discount program, known as 340B, for hospitals to get cheaper insulin and EpiPens is also new. The 340B program requires drug companies that want to sell their drugs through state Medicaid plans to offer steep discounts to hospitals that serve primarily low-income patients. The program has grown considerably in the last few years. Continue Reading
To read a copy of the President's Executive Order on 'Eliminating Kickbacks to Middlemen' click here
Ohio Capital Journal
Federal officials are probing actions taken in Ohio in 2017 by the largest Medicaid managed care provider in the United States, a source familiar with the investigation has told Ohio Capital Journal.
The U.S. Centers for Medicaid and Medicare Services declined to confirm or deny the existence of an investigation. But the source said the agency is looking into a finding by a consultant hired by the state to analyze billions of dollars in drug transactions in the state’s Medicaid managed-care program during 2017 and 2018.
The finding raised questions about whether Centene — a company which is not well known but is a huge player in state Medicaid programs — effectively billed the state for duplicate services while working with another of the nation’s largest corporations, CVS Health.
The potential problems found in Ohio would not be the first for Centene, The company already has faced more than $23 million in fines and lost incentives over separate issues with its performance in more than a dozen state Medicaid programs, the Des Moines Register reported in 2018.
Loads of hidden money
As with most other states, Ohio’s $26 billion Medicaid program is mostly privatized. And some of the corporations that contract with the agency have long been accused of using their size and a lack of transparency to take outsized profits from a Medicaid system that is known for underpaying providers such as doctors, hospitals, dentists and pharmacists.
Experts say it’s especially critical now to make sure corporations aren’t extracting excessive profits from Medicaid, something they’ve been increasingly accused of in a rapidly consolidating marketplace. That’s because the global coronavirus pandemic is driving large numbers of new patients onto the Medicaid rolls even as the disease is squeezing the economy and sapping tax revenue to pay for the program.
The state’s Medicaid caseloads had dropped in all but two of the 18-months leading into 2020, but then they expanded rapidly when the new coronavirus hit. After increases of fewer than 10,000 in January and February, they leapt by 25,000 in March and 94,000 in April, the latest month for which data are available.
The Ohio Department of Medicaid contracts with managed-care companies to coordinate health care for almost 90% of the roughly 3 million patients in the program.
The companies, in turn, contract with doctors, hospitals and other providers. They also contract with pharmacy benefit managers, which decide what drugs get covered and how, determine pharmacy reimbursements, leverage manufacturer rebates, reconcile pharmacy claims and provide other services.
Pharmacy benefit managers, or PBMs, fight hard to keep information about how they determine drug reimbursements secret. But in the summer of 2018, The Columbus Dispatch obtained confidential reimbursement information from 40 pharmacies. It showed that the two PBMs — CVS Caremark and OptumRx — serving Ohio Medicaid’s five managed-care organizations were charging the taxpayer-funded managed-care companies a lot more for drugs than they were paying the pharmacies that had bought them and dispensed them to patients.
Then, under political pressure, the Medicaid department got the PBMs to cough up all of their reimbursement data between April 1, 2017 and March 31, 2018, and hired the consulting firm HealthPlan Data Solutions to analyze it.
Perhaps the biggest finding was that the pharmacy-benefit managers serving Ohio Medicaid charged managed-care companies such as Buckeye almost a quarter-billion dollars more for drugs than they paid the pharmacies that had dispensed them.
But in addition to that eye-popping number, the analysis also found that one of the state’s five managed-care plans, Buckeye Health, paid its PBM, CVS Caremark, through Envolve, a “pharmacy benefit administrator.”
There is a close relationship between Buckeye and Envolve. Both are owned by St. Louis-based Centene, which represents 13% of Americans enrolled in Medicaid managed-care plans. That makes Centene, No. 42 on Forbes’ Fortune 500, the largest Medicaid managed-care company in the United States. Continue Reading..
Robert Stanley calls his son Payton "a multi-million-dollar man." Before Payton was even born he had a stroke in his mother's womb during the third trimester. At two months old, he began having seizures, at times more than 100 in a day. He's had a portion of his brain removed. Today, at age five, he requires a specialized breathing treatment and cannot walk. The family makes regular trips from their home in Vinita, Oklahoma, to Memphis' LeBonheur Children's Hospital, which is widely recognized for its pediatric neurology and epileptology care. Stanley has worked two jobs so that Payton's mother Stephanie can stay home full time. Payton requires 30 medications every day, many of which cost, in Stanley's words, an "extremely stupid" amount of money.
I called Stanley last month to talk about the cost of one medicine in particular. Acthar is an injectable drug manufactured by St. Louis-based Mallinckrodt Pharmaceuticals and used to treat infantile spasms. Payton was on it for eight months in 2015. Disappointed with the pediatric care they found in Oklahoma, where doctors had misdiagnosed Payton, the family had made their first trip to LeBonheur. The doctors there diagnosed Payton with infantile spasms and prescribed Acthar. And despite the litany of high-cost medications that have been prescribed to Payton over the years, the sticker shock that came with Acthar still sticks in Stanley's memory.
"I heard about the price when I went to go pick up the medicine. I asked the representative that night, 'How much is this stuff?'"
The representative's answer: "Fifty-thousand dollars a vial."
"I about had a heart attack," Stanley told me.
A standard Acthar treatment lasts a month and requires two to three vials. Payton ended up being on the drug for eight weeks.
Fortunately, the family's insurance covered the treatment, though it ended up being ineffective for Payton, who had to eventually have a portion of his brain removed in order to treat the seizures. At least they hadn't been bankrupted by Acthar.
However, someone had to pay for those $50,000 vials. And about a year after Stanley first heard of Acthar, it also came to the attention of Larry Morrissey, then the mayor Rockford, Illinois. Like Stanley, Morrissey couldn't believe the price. Unlike Stanley, Morrissey's city actually had to pay.
Rockford is a city of about 150,000 people, 90 miles west of Chicago. Like a lot of Midwestern cities, it has suffered from crime, depopulation and an image problem, occasionally ranking high on those dubiously researched "Worst Places to Live" articles. Morrissey, a Democrat, was elected on an agenda of cost saving and infrastructure improvements. One of those cost-saving initiatives was to find out exactly how much the city, which funds its own health plan for municipal workers, was spending on health care. In 2016, the auditors noticed something unusual: The previous year, the city had spent nearly half a million dollars on a drug called Acthar. Only two people on the city's health plan took the injectable drug, and between them they took a total of just nine vials. That came out to more than $54,000 a vial.
"These are funds that could have been directed to public infrastructure, economic development or crime reduction," Rockford spokesperson Laura Maher says. "[Half a million] is equivalent to approximately five police officers annually."
In the year 2000, a vial of Acthar sold for just $40. The two-decades-long story of how this drug saw its price increase from $40 to $54,000 is riddled with allegations of kickbacks, sketchy marketing and a "murky alliance" between a drug manufacturer and America's biggest pharmacy benefit manager. Key to the story are two of St. Louis' biggest corporations.
In 2017, Rockford filed a lawsuit against the drug's manufacturer, St. Louis-based Mallinckrodt, and the drug's sole distributor, Express Scripts, which also has its headquarters in St. Louis. Rockford's suit accuses the two companies of colluding to artificially raise the price of the drug. It also accuses Mallinckrodt of essentially paying doctors to prescribe Acthar even when cheaper, more suitable drugs were available.
The RFT reached out to Mallinckrodt and Express Scripts for comment. Representatives of both entities replied that they cannot comment on pending litigation.
U.S. Magistrate Judge Iain D. Johnston, who is handling the early portion of the Rockford case, wrote in a pre-trial opinion, "The issues at stake in these cases are large ... [T]he potential amount in controversy is extraordinary. The cases contain racketeering and antitrust claims, which, if successful, could lead to huge damage awards. In today's legal vernacular, these are 'bet the company' cases."
From a pig's gland to a $6 billion company
Acthar is the brand name for the naturally occurring adrenocorticotropic hormone (ACTH). In the 1940s, physician Philip Hench and chemist Edward Kendall discovered it could be extracted from the pituitary gland of a pig (usually after the rest of the pig had been butchered for meat) and injected into a human. ACTH causes humans to create more cortisone, which reduces inflammation, and for decades Hench and Kendall's discovery worked wonders for people who suffered from rheumatoid arthritis. The two men later won a Nobel Prize in Physiology or Medicine for their work.
But as decades passed, advances in medicine led to other anti-inflammatory therapies, such as Prednisone, which can be manufactured cheaply and don't come with the inevitable trace impurities that are extracted from a pig's gland along with ACTH.
By the 1990s, ACTH was no longer the preferred treatment for anything except infantile spasms, or IS, a form of epilepsy that is as rare as it is serious.
Pediatric neurologist Jim Wheless told me that there are about 2,000 new cases of IS a year. "If these kids are not treated timely with effective medication, then almost all of them will go on to have significant mental impairment," he said.
Wheless added that when it comes to treating IS, there are really only two FDA-approved medications, and of those two Acthar has been clearly shown to be superior, with an efficacy rate of about 90 percent.
"If it was your child or your grandchild and I'm sitting across the table saying, 'Gosh, if we don't jump on this and treat this effectively, the child is probably going to have significant mental challenges the rest of their life. There's only two medicines, and this one works better — what do you want to do?'" Wheless said. "You can guess what most families are going to opt for."
Wheless added, "Now, what if I tell you that the ideal medication is so expensive you have to mortgage your house? Or that you can't have a house?"
But a single vial of Acthar didn't always cost more than a down payment on a starter home.
In the 1990s, Acthar was a product of Aventis Pharmaceuticals, the only company producing ACTH of any kind. At that time, a vial of Acthar from Aventis cost about $40, and the low incidence of infantile spasms combined with the low price meant that Aventis lost money on the drug. They tried to stop producing it in the 1990s, but pediatricians intervened, saying that without Acthar parents whose children suffered infantile spasms would be without an important treatment.
In 2001, Aventis sold Acthar to California-based Questcor for just $100,000, making Questcor the only source for the first-line drug against infantile spasms. The company used this monopoly to essentially set its own price. Right after acquisition, Questcor raised the price of Acthar from $40 a vial to close to $800 a vial. The price grew steadily from there. By 2007, insurance companies and Medicare were paying nearly $2,000 a vial.
But that was just the beginning. In 2007, Don Bailey became CEO of Questcor. Over the next thirteen years, the "one-drug company" turned that one drug into a $6 billion business.
During the first year of Bailey's leadership, Questcor struck a deal with Express Scripts, making the St. Louis-based pharmacy benefits manager the sole distributor of Acthar.
Over 80 million people get their medications through Express Scripts, a buying volume that gives the company considerable power to negotiate lower prices from drug companies. The company regularly posts revenues of more than $100 billion a year.
However, Rockford's suit alleges, because of the exclusive distribution deal Express Scripts inked with Questcor, the e-pharmacy had no incentive to negotiate for a lower price and therefore did not do so.
In the months following the Questcor deal with Express Scripts, the price of Acthar went from $2,000 a vial to more than $29,000 a vial.
Eric Liebler was a senior vice president at Questcor around the time of the Express Scripts deal. Though he wasn't involved in the deal with the e-pharmacy, he was privy to the company's conversations about dramatically increasing the price of Acthar. He told me that prior to the deal the company drafted two plans for how it could increase the drug's worth.
Option one was to do a lot of research on Acthar, find new uses for it and, while doing so, raise the price gradually over several years in a way commensurate with the increased number of uses.
"Option two was, 'Let's just do it all at once,'" Liebler said. "You're going to get yelled at for raising the price no matter what you do, so go from $1,500 right up to $21,000."
Liebler says he recommended the first approach, doing it gradually. The company went with the second, dramatically raising the price in short order.
"I helped them write the press release, but then I resigned immediately," Liebler said. "There are many companies who have played the price-increase game, but I'd never seen anything like this at this magnitude."
By 2012, insurance companies were increasingly dubious about both the price of Acthar and its efficacy. Health insurer Aetna reduced reimbursements for Acthar, a spokeswoman telling Reuters at the time, "The decision was based on the lack of clinical evidence that the drug is more effective than existing steroids."
In the wake of Aetna's announcement, Questcor's stock price dropped by 40 percent.
However, good news for Questcor and their shareholders came in 2014 when St. Louis-based Mallinckrodt Pharmaceuticals paid Questcor $5.9 billion as part of a merger between the two companies. The merger raised eyebrows. At the time, Questcor was the subject of two federal whistleblower complaints, a Securities and Exchange Commission investigation related to the marketing of Acthar and an ominous 2012 New York Times article that highlighted the extreme price increase. "I have a Cadillac in my refrigerator," says one Acthar patient quoted in that article, referring to an unused 5 ml vial.
One month after the merger, Bailey, the Questcor CEO whose tenure coincided with most of Acthar's price increase, sold almost a quarter million shares of Mallinckrodt, worth nearly $19 million, according to stock market tracking tool Wallmine. Bailey also joined Mallinckrodt's board of directors.
"Most of the Questcor people who stayed when I was uncomfortable, they became very rich, ungodly amounts of money," Liebler said. "Their [stock] options were back at 40 cents, 80 cents, and they probably sold at one hundred bucks. When I write the checks for my daughter's college, I know that would have been easier financially to stay. But I did the right thing."
The controversy and litigation stemming from Acthar, its pricing and marketing have only increased since Mallinckrodt's $6 billion acquisition.
While the data supporting Acthar as an effective treatment for infantile spasms is strong, the market for IS treatments is limited given the rarity of the disease. Wheless, the pediatric neurologist, said that he also believes given Acthar's price it's only a matter of time until alternative, cheaper treatments for IS appear on the market.
Seeking to expand the market for Acthar, Questcor and Mallinckrodt have both promoted it as a treatment for conditions other than infantile spasms, and at times these promotions have drawn accusations that the drug is being promoted in ways outside its FDA approval.
n 2016, a man named Barry Franks who had worked in sales for Questcor and later Mallinckrodt filed a lawsuit against the company claiming that he was fired for not selling Acthar to doctors based on uses that were not FDA approved. Acthar is FDA approved as an additional treatment for acute flare-ups of rheumatoid arthritis, or RA, but Franks claimed salespeople were incentivized to promote the drug and encourage refills as a long-term therapy to manage RA. Express Script's own prior authorization process stated that in treating rheumatic disorders, Acthar is only approved for "short term administration for an acute episode."
Furthermore, Franks' suit claimed the salaries for Mallinckrodt's sales staff were pegged directly to their ability to push Acthar to doctors as a long-term RA treatment. In addition to base pay, salespeople took part in an "Incentive Bonus Plan" — according to Franks this was referred to within the company as the "Rheum Incentive Plan" — through which salespeople could potentially earn more than their base salary.
Meanwhile, by 2018, four years after Mallinckrodt acquired Acthar, the price of one vial reached $40,000.
In addition to what Acthar is promoted as a treatment for, there are also considerable concerns about who is doing the promotion. Continue Reading
The Supreme Court of The United States (SCOTUS) has rescheduled the Rutledge v. The Pharmaceutical Care Management Association (PCMA) hearing for October 6, 2020.(1) The initial April hearing date had been postponed due to the coronavirus disease 2019 pandemic (COVID-19).(2)
Rutledge v. PCMA revolves around whether states have the right to regulate pharmacy benefit managers (PBMS). Arkansas Attorney General Leslie Rutledge has petitioned the court to overturn the US Court of Appeals for the Eight District’s earlier decision to maintain Arkansas’ statute regulating PBMs’ drug reimbursement rates. In a legal brief filed in February 2020, however, Rutledge argues the statute is preempted by the Employee Retirement Income Security Act of 1974.3
At least 4 pharmacy groups, The American Pharmacists Association, The Arkansas Pharmacist Association, The National Alliance of State Pharmacy Associations, and the National Community Pharmacists Association have publicly expressed their support for states’ rights to regulate PBMs.3 According to an earlier report, these 4 groups have jointly argued that unregulated PBM business practices limits access to pharmacists care and prevents the optimal use of medications.(3)
In April 2020, the Academy of Managed Care Pharmacy (AMCP) filed an amicus brief in support of the Eighth District’s decision.4 The brief argues that ruling in favor of Rutledge will drive up health care costs, and also will have a big effect on patients too by limiting their ability to access affordable medications, hindering health outcomes.(4)
The AMCP brief also argues that ruling in favor of Rutledge can lead to issues at the administrative level, and can lead to varying and possibly contradictory state laws as well.4