On August 6, 2024, Governor Sarah Huckabee Sanders and the Arkansas Insurance Department Commissioner, Alan McClain, announced notices of penalties in the amount of nearly $1.5 Million against Caremark, Express Scripts, MedImpact, and Magellan, which are several of the largest Pharmacy Benefit Managers (“PBMs”) in the country.
Arkansas’s enforcement action against these PBMs follows the Supreme Court’s unanimous and significant decision in Rutledge v. PCMA, which upheld provisions of Arkansas laws that required PBMs to reimburse Arkansas pharmacies at a price equal to or higher than the pharmacy’s acquisition costs. On June 28, 2024, Arkansas issued a bulletin advising PBMs to cease paying Arkansas pharmacies below national average drug acquisition cost (“NADAC”) and that failure to do so would constitute a violation of Ark. Code. Ann. 23-92-506(b).
According to the information available about this matter, the fines are the result of nearly 300 individual alleged violations of payment or reimbursement by PBMs below NADAC. This drastically low reimbursement was obtained by reporting from a small portion of Arkansas pharmacies to the State over a period of approximately three weeks in July 2024. The amount of $1.5 million was calculated based on a penalty amount of $5,000 per alleged violation, with one pharmacy alleging as many as 63 violations by Caremark in only a four-week period beginning July 1, 2024 through July 28, 2024. According to the allegations made by Arkansas, Caremark is alleged to have committed 217 violations, Magellan is alleged to have committed 50 violations, Express Scripts is alleged to have committed 19 violations, and MedImpact is alleged to have one violation.
Arkansas is scheduled to hold public hearings regarding the complaints and fines assessed to the PBMs in the upcoming weeks. In addition to the potential fines, the Arkansas Insurance Department has also indicated that it may request a temporary suspension of PBM licenses to operate until they are able to correct payment systems to ensure proper reimbursement to Arkansas pharmacies.
This type of action by Arkansas underscores the importance of reporting PBM violations of state law and other applicable laws. It also helps to illustrate the importance of the Rutledge Decision. Although that decision came down nearly four years ago, its overall impact for independent pharmacies is still unfolding. Pharmacies should keep in mind that they do not have to tolerate improper and abusive PBM practices and that there are many legal tools available to independent pharmacies to challenge such conduct including federal laws, state laws, and through their contracts with PBMs. Having knowledgeable legal counsel to navigate this complex landscape is critical.
How Frier Levitt Can Help
Frier Levitt represents numerous pharmacies across the United States and has assisted pharmacies in challenging PBM violations of state law, including reporting violations to state authorities. Contact us to speak with an attorney about how your pharmacy can leverage the protections afforded by your state’s laws governing PBMs.
