As we reported here, Plan Sponsors have begun elevating their challenges of Pharmacy Benefit Managers’ (“PBMs”) and Managed Care Organizations’ (“MCOs”) conduct, from PBM pricing to auditing and litigating over PBM practices such as “spread pricing”. Most recently, a group of Plans initiated a lawsuit against CVS Health Corporation, which owns one of the nation’s largest PBMs, Caremark.[1] A similar lawsuit was filed by other Plans against CVS Health in May 2020.[2] These lawsuits reveal a growing willingness of Plan Sponsors to challenge abusive PBM practices and questionable payment arrangements.
In the recent lawsuit, Plans claimed that, among other things, CVS Health overcharged the Plans by intentionally submitting falsely inflated Usual and Customary (“U&C”) prices for generic drugs to contracted plans. The Plans argued that CVS Health secretly offered hundreds of generic drugs at low, discounted prices through cash discount programs, but concealed these lower prices to their Plan customers. CVS was supposed to offer its contract Plans the lowest U&C pricing, but allegedly did not. Plans further alleged that Caremark worked with CVS Health to continue the scheme. Plan Sponsors should learn from the practices exposed in these cases and trigger audit provision in their own PBM contracts.
Plans have rights when it comes to pharmacy benefits. Some of these rights include audits and “market check” provisions. PBMs don’t make the market check and audit provisions easy to exercise. A Plan Sponsor may be required to obtain PBM approval before using a particular auditor. In more egregious instances, PBMs do not allow the auditor to share any information with the Plan Sponsors. With respect to market provisions, PBMs often include vague contract terms that permit PBMs to reject competitive pricing obtained by Plan Sponsors through the market check process. However, in many instances, Plan Sponsors are able to compile sufficient data points to reveal “overpayments” and/or “lost savings” that were kept by PBMs and their affiliated companies (e.g., Rebate Aggregators, Third Party Administrators, etc.). Plan Sponsors should exercise their contractual and legal rights to audit PBMs and trigger market check provisions, and ultimately pursue legal action against PBMs.
How Frier Levitt Can Help
Frier Levitt’s Plan Sponsor Practice Group provides a panoply of legal services to Plan Sponsors including, without limitation, healthcare policy review and analysis, auditing (and where necessary litigating against) PBMs to verify that Plans have been paid the proper rebates. If your organization is a Plan Sponsor, contact us today.
[1] CareFirst of Maryland, Inc., et al. v. CVS Health Corporation, et al., Case No. 21-cv-000223, in the United States District Court for the District of Rhode Island.
[2] Blue Cross and Blue Shield of Alabama, et al. v. CVS Health Corporation, et al., Case No. 20-cv-00236, in the United States District Court for the District of Rhode Island.
