PHARMACY ALERT: History and Status of Generic Effective Rate

We first reported in late 2018 that Pharmacy Benefit Managers (PBMs) and Pharmacy Services Administrative Organizations (PSAOs) have implemented a new type of post-sale recoupment called Generic Effective Rate (GER) upon their member pharmacies. In particular, CVS Caremark (“Caremark”) have been in the forefront, either directly or through its contracted PSAOs, to collect payments made to the pharmacies allegedly in excess of the contracted GER.

Caremark started imposing GER liabilities on the pharmacies for claims submitted by the pharmacies in the calendar year 2018. These claims were already approved and paid by Caremark (albeit Caremark had every opportunity to deny such claims or at minimum, requested prior authorizations in advance) and the prescriptions were already dispensed by the pharmacies to Caremark patients. It is axiomatic that such egregious recoupment caused devastating impact on the pharmacies’ day-to-day operation to the point of financial turmoil, while impacting patient care. Perhaps most egregiously, we have also learned that large chain pharmacies approached and purchased independent pharmacies that were forced to close their business due to excessive GER liability, with the purchase prices having been forced well below the fair market value.

In 2019, a number of PSAOs began escrowing a portion of reimbursements due and owing the pharmacies in anticipation of Caremark’s GER true-up and adjustment at the end of year. The escrowing in and of itself has placed additional financial burden upon the pharmacies.

Unfortunately, PBMs and their abusive GER tactics continued in 2020. Most recently, we found out that OptumRx started demanding GER recoupment for claims submitted by the pharmacies in the calendar year 2018. OptumRx’s GER collection and its timing are highly suspicious given that OptumRx should be returning GER recoupment to Plans but OptumRx’s contracts with the Plans may have been terminated, such that OptumRx may not bear any obligation to return GER recoupment to the Plans.

How Frier Levitt Can Help
In light of the foregoing, the pharmacies should contact their PSAOs and/or PBMs and obtain contracts detailing the pharmacies’ GER obligations. Also, the pharmacies should consult with attorneys who have help pharmacies recover GER recoupments or have prosecuted GER cases against PBMs. Frier Levitt has extensive experience representing pharmacies in challenging the GER adjudication. If your pharmacy has received such a letter from Pharmacy First or similar PSAO, contact Frier Levitt today to speak to an attorney.

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