A battle between Arkansas pharmacists and a national group of pharmacy benefit managers moved to federal court Friday in the form of a lawsuit challenging a new state law, supported by pharmacists, that governs how they are reimbursed for the generic drugs they dispense.
The lawsuit, brought by Pharmaceutical Care Management Association, a Washington, D.C.-based trade group representing companies that administer prescription-drug benefit plans for employers or insurance companies, challenges the constitutionality of Act 900 of 2015, which was signed into law April 22 and took effect July 22.
The law requires the benefits managers to reimburse pharmacies at or above the cost the pharmacy paid for the drug from a wholesale supplier. It is similar to laws passed in 24 states so far, according to the National Community Pharmacists Association of Alexandria, Va.
Pharmacists said the legislation was necessary because prices for generic drugs at the wholesale level have been skyrocketing, often overnight or over a period of a few days. By the time the pharmacists dispense the drug and seek reimbursement, the administrators haven't adjusted their reimbursement rates and, therefore, insist on reimbursing pharmacies at the drug's older, lower price, pharmacists said.
Mark Riley, who heads the Arkansas Pharmacists Association, said the administrators often pocket the difference without telling the employer or insurer whose plan they are administering -- a practice known as creating a "spread."
The Pharmaceutical Care Management Association said its administrators maintain lists of maximum allowable costs for generic drugs. Through the Arkansas law and others like it, the group said, pharmacists are trying to get reimbursed at the maximum allowable cost for each drug, "regardless of whether the pharmacies could have acquired the drugs for less, and regardless of whether the pharmacies receive rebates or discounts not reflected on the wholesaler's or manufacturer's invoice."
"In essence, " the group's lawsuit alleges, "Act 900 guarantees Arkansas pharmacies a profit on every MAC [maximum allowable cost] script filled."
Riley said the situation is the exact opposite: "We're saying no, we're not greedy -- you're greedy."
He said a recent survey of members of the Arkansas Pharmacists Association, which represents about 2,200 pharmacists of all stripes -- those working in small stores, regional chains and national chains, as well as those in hospitals or special compounding pharmacies -- reflects that 11 percent of their prescriptions are reimbursed by pharmacy benefit managers at an amount below their net invoice costs, "and it's growing."
"We can't continue to fill prescriptions below cost," Riley said. "The law is designed for fairness."
The lawsuit, officially filed at the end of the business day Thursday and assigned to U.S. District Judge Brian Miller, began generating backlash from pharmacists Friday as word of it spread. The only defendant is Arkansas Attorney General Leslie Rutledge, whose spokesman, Judd Deere, said Friday that she "is reviewing the lawsuit, but will not comment further since it is an ongoing matter."
The suit alleges that by guaranteeing a profit for pharmacists, "the act will cause higher prices for prescription drugs and thereby cause significant and substantial harm to consumers, senior citizens, health plan payers including employee benefit plans, employers and insurers, and pharmacy benefit managers."
In its press release Friday, the national pharmacists' association said: "Arkansas policymakers enacted a bipartisan law to bring more transparency to the generic drug pricing and reimbursement process. The staunch opposition of PBM [pharmacy benefits manager] corporations to more openness and disclosure is motivated purely by the desire to cling to windfall profits, plain and simple."
It called the lawsuit "shameful" and "indicative of how desperate PBM corporations are to fight any attempt to increase transparency into how they determine pricing and reimbursement for such medications."
The suit, however, contends the administrators' methods of reimbursing pharmacists is actually lowering drug costs.
"Payers, including Medicaid, Medicare, health insurance plans and PBMs, have experienced considerable difficulty in determining the 'true' market price for dispensed generic pharmaceuticals," it says. "Accordingly, they have used various strategies to determine the price they will pay when a prescribed pharmaceutical is dispensed. These strategies have led to the near-universal use of MAC programs for generic pharmaceutical reimbursements. MAC programs have resulted in a more efficient pharmaceutical market and lower drug costs overall."
The Arkansas pharmacists group describes it differently, saying, "PBMs arbitrarily set the pricing for generic medications. Generic drug pricing is completely controlled by the PBMs with the pharmacy having zero idea of how much they will be paid until they process a claim."
The lawsuit seeks a declaration that Act 900 unconstitutionally imposes an excessive burden on interstate commerce and impairs existing contracts between the Pharmaceutical Care Management Association's members and their customers, health insurance carriers and employers, and the association's members and pharmacies.
The suit also seeks a declaration that the law violates due process rights and other rights guaranteed under the U.S. and Arkansas constitutions. It asks that the state be enjoined from enforcing it.
Pharmaceutical Care Management Association's member companies include Aetna Pharmacy Management; Catamaran Corp.; Cigna Pharmacy Management; CVS Health Corp.; Express Scripts; Humana Pharmacy Solutions; LDI; MedImpact Healthcare System; Optum Rx; Prime Therapeutics; and USScript.
The suit says the companies administer prescription-drug benefit plans for more than 236 million Americans covered by the ERISA (Employee Retirement Income Security Act) and non-ERISA (including Medicare Part D) health plans. It notes that the ERISA-covered plans include both insured and self-funded plans sponsored by employers and labor unions, while the non-ERISA-covered plans include those sponsored by state and local governments that contract directly for pharmacy benefits manager services, as well as plans sold in the individual health insurance market.
Both the national pharmacists group and the administrators agree that about 85 percent of prescriptions filled in the United States today are for generic drugs, which the Pharmaceutical Care Management Association describes as "bioequivalent to previously patented and FDA-approved brand-name drugs." The groups also agree that pricing in the generic drug market is "volatile," and that generally, the more generic versions of a drug that are available, the lower the price at which pharmacies can buy it.
"It's not uncommon to see a 1,000 or more percent increase overnight," Kevin Schweers of the national pharmacists' group said Friday. "It's complete chaos."
Metro on 08/15/2015