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September 14, 2020

Eighth Circuit Court of Appeals Backs PBM Steering Practices

Last week, the Court of Appeals for the Eighth Circuit dismissed allegations by independent pharmacies against pharmacy benefit manager Express Scripts (ESI) that the PBM was taking advantage of its role in the marketplace to switch consumers to its own mail-order pharmacy program without the consent of the pharmacy or customer.

Last year, five independent pharmacies commenced an action alleging that ESI was in breach of its contract by requiring the pharmacies to provide information about customers—including confidential information without authorization—to steer them to ESI’s own mail-order service. The pharmacies contended that ESI was only permitted to use that information in order to confirm a customer’s coverage and to reimburse network pharmacies.

The court determined that, in reviewing the terms of the provider manual which governed the relationship between ESI and the pharmacies, there was no language that precluded ESI from using customer information for purposes independent of ESI’s relationship with the pharmacies.

Based on the federal court’s ruling, it’s critical that independent pharmacies are aware of their obligations as well as those of the PBM under the governing provider manual and agreement. We also strongly recommend that independent pharmacies be familiar with any protections against patient steering that may be afforded under the state law that governs their operations. On the federal level, we forecast that reform efforts are coming that will seek to address the conflict of interest presented by the dual role that PBMs avail themselves of in the marketplace as both a benefit manager and pharmacy.

As the prevalence of patient steering continues, Barclay Damon is here to assist pharmacies in their struggle to maintain patient rights and choice when it comes to their care and services received. Our Health Care Controversies Team has successfully represented independent pharmacies across the country in navigating matters involving pharmacy benefit managers, including audits and terminations of provider agreements.

If you have any questions regarding the content of this blog post, please contact Linda Clark, Health Care Controversies Team leader, at lclark@barclaydamon.com; Brad Gallagher, counsel, at bgallagher@barclaydamon.com; or Mary Connolly, associate, at mconnolly@barclaydamon.com.

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