US
Pharm. 2006;2:62-66.
Are escalating prescription
drug prices anything like the weather--everybody talks about it but no one can
do anything to change it? Are pharmacists as much to blame for soaring drug
costs as weathermen are for the lousy weather? Can any one person,
organization, or the government do anything really meaningful to change the
economic policies that force some people to choose between buying food and
purchasing their needed medications? And by the way, why are the prescription
prices in the
If the facts of this case
seem familiar, it is because many of the issues were the subject of an earlier
column, albeit with the parties cast in different roles.2 The state
of
This time around, the
national trade association that represents pharmacy benefits managers (PBMs),
the Pharmaceutical Care Management Association (PCMA), sued the state to try
to block implementation of its Unfair Prescription Drug Practices Act (UPDPA).
4 After losing this battle in the federal trial court, PCMA appealed to
the First Circuit Court of Appeals. The ruling issued by a unanimous
three-judge panel affirmed dismissal of the appeal, thereby allowing
The court characterized PBMs
as "major players in the delivery of health care in the
They serve as
intermediaries between pharmaceutical manufacturers and pharmacies on the one
hand (the "supply" side of the trade) and health benefit providers (e.g.,
insurers, self-insured entities, health maintenance organizations, and public
and private health plans) on the other (the "demand" side). The services that
PBMs extend are designed to facilitate the provision of prescription drug
benefits to the people who utilize the services of the health benefit
providers. For example, PBMs often provide health benefit providers with
access to an established network of pharmacies, where customers of the health
benefit providers can obtain drugs at certain set prices. PBMs negotiate
volume discounts and rebates with drug manufacturers by pooling substantial
numbers of health benefit providers. This pooling gives the PBMs tremendous
market power to demand concessions from the manufacturers. PBMs also provide
drug utilization review services and "therapeutic interchange programs" (in
other words, substituting a drug for the one actually prescribed by a doctor).
The court then went into a
detailed analysis of the problems that PBMs can cause in the absence of any
regulation:
In this role as
intermediary, however, PBMs have the opportunity to engage in activities that
may benefit the drug manufacturers and PBMs financially to the detriment of
the health benefit providers. For example, in cases of "therapeutic
interchange," a PBM may substitute a more expensive brand name drug for an
equally effective and cheaper generic drug. This is done so that the PBM can
collect a fee from the manufacturer for helping to increase the manufacturer's
market share within a certain drug category. Similarly, a PBM might receive a
discount from a manufacturer on a particular drug but not pass any of it on to
the health benefit provider, keeping the difference for itself. The health
benefit provider, however, often has no idea that a PBM may not be working in
its interest. This lack of awareness is the result of the fact that there is
little transparency in a PBM's dealings with manufacturers and pharmacies.
The upshot of all this, as
the trial court judge wisely observed, is: "whether and how a PBM actually
saves an individual benefits provider customer money with respect to the
purchase of a particular prescription drug is largely a mystery to the
benefits provider."5
To address the question of
whether PBMs are actually helping the
Under this law, PBMs are
required to act as fiduciaries for their clients and adhere to certain
specific duties. For example, "they must disclose conflicts of interest,
disgorge profits from self-dealing, and disclose to the covered entities
certain of their financial arrangements with third parties."6
To secure the trade secrets of companies affected by this law, disclosures
made by the PBMs to the covered entities are protected by confidentiality
requirements. The law is specific in that none of the disclosures are to be
made available to the public.
PCMA, on behalf of its
member PBMs, sued
The other argument made by
PCMA is perhaps the more interesting one. The association claimed that the
UPDPA mandatory disclosure provision violates the First Amendment of the U.S.
Constitution by compelling commercial speech in the context of a voluntary
business relationship. Put in other words, PCMA argued that the law forces the
PBMs to "speak," i.e., make disclosures, when it would not have to do so
otherwise, as a condition of doing business in
The court concluded that
although it is a close question, the speech mandated by the UPDPA meets this
definition. It reasoned that many of the UPDPA's provisions are overtly geared
at the economic interests of the PBMs and the covered entities.8
The court also noted that the UPDPA provisions that are at face value less
related to "economic interests," e.g., requiring PBMs to disclose conflicts of
interest, are aimed at eliminating certain PBM practices that unnecessarily
increase the cost of prescription medications. The court ruled:
The UPDPA disclosure
provisions do not run afoul of the First Amendment. PCMA's member PBMs only
have a minimal interest in withholding the information the UPDPA requires from
them, especially given Maine's interest in ensuring that its citizens receive
the best and most cost-effective health care possible. The information
disclosed under the UPDPA will help the "covered entities" that are
responsible for paying for medications in Maine ensure that they and their
customers are not adversely affected by the abuses and self-dealing of certain
PBMs. Furthermore, we think it obvious that the UPDPA's disclosure
requirements are "reasonably related" to
The Court of Appeals also
dismissed the remainder of PCMA's other claims.
While the drug companies and
PBMs have now lost two cases in
The fight then spread to
REFERENCES
1. Pharmaceutical
Care Management Association v Rowe (Maine Attorney General), Slip Op No
05-1606 (
2. Vivian JC. State
prescription benefit programs. US Pharmacist 2001;26(7):46-55.
Available at:
www.uspharmacist.com/oldformat.asp?url=newlook/files/Phar/ACF234C.htm&pub_id=8&article_id=745.
3. PHRMA v.
CONCANNON, Slip Op. No. 00-2446 (May 16, 2001US CT APP 1st Cir), 2001
4. Me. Rev. Stat.
Ann. tit. 22, § 2699 (2005).
5. Pharm. Care Mgmt.
Ass'n v. Rowe, No. 05-1606, 2005
6. Me. Rev. Stat.
Ann. tit. 22, §§ 2699(2)(A-G) (2005).
7. Zauderer v.
Office of Disciplinary Counsel of the Supreme Court of Ohio, 471 U.S. 626, 105
S. Ct. 2265, 85 L. Ed. 2d 652, 17 Ohio B. 315 (1985); Wooley v. Maynard, 430
U.S. 705, 97 S. Ct. 1428, 51 L. Ed. 2d 752 (1977); Miami Herald Publ'g Co. v.
Tornillo, 418 U.S. 241, 94 S. Ct. 2831, 41 L. Ed. 2d 730 (1974).
8. See, e.g., Me.
Rev. Stat. Ann. tit. 22, § 2699(2)(F) (requiring PBMs to disclose and
disgorge any payment or benefit based on volume of sales or classes or brands
of prescription drugs).
9. Quach HK. The
other drug war. The
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Published February 20, 2006