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December 21, 2015

Federal Courts Rule Against Pharmacy Benefit Managers in Two Cases

Federal courts in the Midwest issued two decisions against Pharmacy Benefit Managers (“PBMs”).

Missouri Court Upholds Antitrust Claims Against Express Scripts, Inc.

In HM Compounding Services, Inc. et al. v. Express Scripts, Inc., No. 4:14-CV-1858 (E.D. Mo.), United States District Judge John A. Ross upheld antitrust and related claims against Express Scripts, Inc. (“ESI”), one of the nation’s largest PBMs.  In a rare but potentially significant victory for a pharmacy suing a PBM, the court held that the plaintiff compounding pharmacy had sufficiently pleaded allegations that ESI and other PBMs illegally conspired to drive it and other independent pharmacies out of the compounding business, employing improper means such as unfair audits of pharmacies, intimidating letters to doctors and misleading communications with patients.

Notably, the court credited the theory that the PBM executives’ activities at meetings of the PCMA trade association provided a sufficient basis – at the pleading stage at least – to support the element of concerted action under the antitrust laws, going beyond mere allegations of parallel conduct.  The decision also raises the stakes for PBM letters and phone calls to prescribing physicians and patients, as those communications have now been held to support claims for deceptive trade practices.

Although merely a decision on the pleadings and not an adjudication on the merits, the HMC case nonetheless provides new support for pharmacies challenging what they deem to be overzealous or improper auditing and reimbursement determinations by PBMs.  Most other pharmacies looking to bring similar claims, however, will still have to overcome the hurdle of mandatory arbitration clauses, which atypically was not present in this case.

Southern District of Iowa Dismisses PCMA Lawsuit Challenging Iowa PBM Regulation Statute

The Southern District of Iowa granted the State of Iowa’s motion to dismiss a complaint brought by the Pharmaceutical Care Management Association’s (“PCMA”) alleging that the state’s PBM regulation law was unconstitutional.  Pharmaceutical Care Management Association v. Gerhart, et al., Index No. 4:14-cv-000345 (S.D. Iowa), Sept. 8, 2015.

In 2014 the state passed Iowa House File 2297, which required PBMs to submit certain information to the Iowa Insurance Commissioner, to use nationally recognized data when setting maximum reimbursement amounts for certain prescription drugs, to disclose the data they use in calculating their reimbursement amounts and give contracting pharmacies a chance to contest the reimbursement amount.  PCMA, the national trade association for PBMs, alleged that the statute violates the dormant Commerce Clause and is unconstitutionally vague.  The court disagreed, holding that PCMA had failed to show that any burdens imposed by the statute outweigh its putative local benefits or that its terms are not subject to understanding by an ordinary business person.

The decision was welcomed by, among others, the Iowa Pharmacy Association, whose CEO, Kat Gainer, stated, “The dismissal of all six of PCMA’s claims to uphold the PBM legislation passed in the state of Iowa is a victory for pharmacies and healthcare consumers, not only in our state but across the country.”

The court’s analysis could make it more difficult for PBMs to challenge similar legislation in other states.


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