STAT News November 5, 2024
Three independent pharmacies have filed separate lawsuits accusing GoodRx, which markets a prescription drug discount card, of conspiring with several pharmacy benefit managers to fix reimbursement fees, the latest skirmish over the opaque pharmaceutical supply chain in the U.S.
At issue are the behind-the-scenes transactions involving generic drugs, which account for an estimated 90% of the prescriptions written in the U.S. and, consequently, represent a lucrative market. The lawsuits claim, however, that GoodRx and some of the largest PBMs coordinate their reimbursement policies in a way that has deliberately reduced fees for the pharmacies.
The “anti-competitive” tactic has contributed to deteriorating finances for a growing number of independent pharmacies, according to the lawsuits, which noted “thousands” of local drug stores have closed in recent years. The pharmacies argued the dispute is one of several over reimbursement fees that, ultimately, favor pharmacies affiliated with the PBMs themselves.
“The upshot of this scheme is that the conspiring PBMs, by coordinating their reimbursement decisions through GoodRx, never pay pharmacies more for generic drugs than any rival PBM has agreed to pay in its separate negotiations with those pharmacies. This is nothing more than price fixing,” argued a lawsuit filed by Community Care Pharmacy, which is based in Michigan and sued only GoodRx.
We asked GoodRx for a comment and will pass along any reply.
The mounting clashes over such fees are at the heart of what independent pharmacies have labeled a growing crisis that affects consumers by reducing choice. One-third of 10,000 independent pharmacies surveyed in March by the National Community Pharmacists Association said they were considering closing their doors due to financial problems.
In their suits, the pharmacies described a complicated world of contracting. Basically, though, PBMs negotiate prices between insurers, pharmacies, and drugmakers, but directly reimburse pharmacies. The PBMs also offer discount cards that consumers can use at their various pharmacy networks, which were historically often used by people without insurance to pay for drugs out-of-pocket.
Until recently, consumers could use a discount card instead of their health insurance if it offered a lower price, but the payment would not be counted toward their deductible. The GoodRx website allows consumers to check prices at different pharmacies, and also offers a discount card and coupons, which the company maintains are accepted at more 70,000 pharmacies across the U.S.
But the lawsuits claim that GoodRx last year reached partnership agreements in which the PBMs use its software to compare discounts for generic prescriptions. From there, purchases were rerouted to the PBM with the lowest price, even if that price was different than what was negotiated by the PBM working for a consumer’s health insurance plan.
“The PBMs collect a portion of the payment for each discount card transaction they process without reimbursing the pharmacy, unlike in regular insurance transactions,” one lawsuit explained. “As a result, the card transactions are more profitable than regular insurance transactions for generics. By routing a larger share of transactions through the cards, PBMs claim a larger share of payments.”
Although independent pharmacies now often lose money on discount card transactions, they initially agreed to honor the cards to “foster customer loyalty and bring traffic into their stores. However, as PBMs amassed significant market power, accepting a PBM’s discount card has become a requirement for pharmacies to be in the PBM’s network and fill prescriptions covered by that PBM.”
The other lawsuits were filed by Keaveny Drug, which is based in Minnesota, and Old Baltimore Pike Apothecary, which is based in Pennsylvania. Both pharmacies also sued CVS Caremark, Express Scripts, MedImpact Healthcare Systems, and Navitus Health Solutions. We asked an attorney representing Community Care Pharmacy why the PBMs were not named in that suit and will pass along any reply.
An Express Scripts spokeswoman wrote us that “the premise of these lawsuits is categorically false. Our partnership with GoodRX helps promote lower prices for patients at the pharmacy counter by directly integrating discount card pricing with customers’ pharmacy benefits. This program is an important part of our work to protect people from high drug costs, particularly for those with high deductible plans.”
A CVS Caremark spokesman wrote to say the company “generally reimburses independent pharmacies at higher levels than chain drugstores, including CVS pharmacies.” He pointed to a program designed to lower out-of-pocket drug costs for patients and maintained the lawsuits are entirely without merit, and “we will vigorously defend against them.”
We asked the other PBMs for comment and will update you accordingly.
The lawsuits arrive as PBMs undergo increasing scrutiny over their role in prescription drug pricing. The issue has grown increasingly fraught over the past decade as more Americans complain they are having trouble affording medicines, either due to rising prices or high prices set for medications that have been recently launched following regulatory approval.
Two months ago, the Federal Trade Commission filed a lawsuit against the three largest PBMs — CVS Caremark, Express Scripts, and OptumRx — and their group purchasing organizations for allegedly anticompetitive practices that “artificially inflated” the price of insulin and, consequently, impeded patient access to the lifesaving treatment.
The administrative complaint accused the PBMs of creating a “perverse” system of rebates that favored insulin that was sold at higher list prices in order to “line their pockets” at the expense of patients, who were forced to pay more for the medication. The agency alleged that PBMs collected billions in rebates and associated fees and, by 2019, one of every four patients was unable to afford insulin.
Independent pharmacies have long complained that PBMs have engaged in various unfair practices, such as questionable audits; uncertain methods used to determine reimbursement fees; and the extent to which PBMs steer patients toward their own pharmacies. CVS, for instance, owns CVS Caremark and the CVS chain of retail drug stores.
At the same time, PBMs and pharmaceutical companies continually spar over the reasons for rising drug prices. PBMs receive rebates from drugmakers that seek favorable placement on formularies, which are the lists of medicines covered by health insurance. Drugmakers argue they must raise prices to compensate for rebates, while PBMs maintain drug companies raise prices to boost profits.
But critics contend rebates create incentives for pharmacy benefit managers to accept higher prices rather than negotiate lower prices for health insurers and employers. Drugmakers, meanwhile, have pushed back over the past few years by releasing reports that contend their net prices — the wholesale drug prices after paying rebates — have been falling.
The ongoing controversies prompted Congress to explore different types of legislation that would curb certain practices, but lawmakers largely abandoned those efforts earlier this year. One Senate bill, which garnered bipartisan support, focused on PBM transparency and would have specifically addressed issues surrounding reimbursement fees.
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