Class action arbitrations were one of the most powerful tools in a lawyer’s arsenal to help independent pharmacies force nation-wide changes to abusive PBM auditing conduct. A class action arbitration is a procedural device that permits one or more independent pharmacies to file and prosecute a claim on behalf of a larger group of independent pharmacies. Without class action arbitrations, independent pharmacies looking to challenge abusive PBM practices are forced to shoulder the financial burden alone, which may render the pharmacy’s ability to pursue those claims economically infeasible. In recent years, the United States Supreme Court has severely limited the ability of independent pharmacies with limited financial resources to “level the playing field” against PBMs by bringing class action arbitrations. In Stolt-Nielsen v. Animalfeeds International Corp., a 2010 decision, the U.S. Supreme Court held that a party may not be forced into a class arbitration unless there is a contractual basis for concluding that the parties agreed to do so. Shortly thereafter, in 2011, the Court in AT&T Mobility LLC v. Concepcion affirmed the validity of arbitration agreements that contained express class action waiver provisions. In the years that followed, PBMs utilized these decisions to maintain their “David versus Goliath” relationships with independent pharmacies and to amend contracts to prevent independent pharmacies from joining forces.
In 2013, the United States Supreme Court in Oxford Health Plans v. Sutter distinguished Stolt-Nielsen and Concepcion, and found that arbitration provisions that do not expressly permit or reject class arbitration may provide a basis to allow class action arbitrations. Nevertheless, many corporations, including PBMs, began including arbitration provisions in their Manuals and/or Network Provider Agreements that expressly waived class action arbitrations. Regrettably, courts have continued to rely upon Concepcion to enforce these class arbitration waivers. So where does this leave the independent pharmacy that does not have the financial wherewithal to challenge PBM behavior?
Independent pharmacies with limited financial resources continue to have options when challenging the abusive audit tactics of PBMs. One such option is for independent pharmacies to enlist the assistance of their local state pharmacy association for financial support where a legal challenge might otherwise be cost prohibitive. Some state pharmacy associations are willing to provide financial backing to a pharmacy member that is challenging an abusive PBM audit practice because a successful arbitration result benefits all of the pharmacy association’s members. Frier Levitt works with state pharmacy associations to protect its independent pharmacy members.
Frier Levitt has developed a unique method to challenge improper and pervasive PBM audit tactics – the “test case” arbitration. The “test case” arbitration is filed by Frier Levitt on behalf of a representative pharmacy that Frier Levitt fully vets before filing the demand for arbitration. This representative pharmacy has suffered the effects of an improper PBM audit practice, below market pricing or network termination that is common to many pharmacies. By arbitrating the dispute on behalf of the representative pharmacy, Frier Levitt endeavors to obtain a favorable “precedent” in arbitration that can subsequently be used to against the PBM on behalf of other pharmacies that were not part of the “test case”, but that have suffered the same PBM practice. A successful result frequently sends a clear message to the PBM that: (1) its abusive audit conduct will not be tolerated, and (2) the issue in dispute has been arbitrated and the pharmacy’s position has prevailed, which suggests an increased likelihood of success in subsequent arbitrations on the same issue.
If your pharmacy has suffered at the hands of an improper and particularly pervasive PBM audit practice, contact Frier Levitt today.
