Express Scripts, the pharmacy benefit manager for Cigna, has filed a lawsuit seeking to overturn a new law in Arkansas that prohibits PBMs from owning or operating pharmacies in the state, and CVS and Caremark have filed their own lawsuit challenging the law.
Express Scripts contends in its lawsuit that the "deceivingly" titled law – "An Act to Prohibit A Pharmacy Benefits Manager From Obtaining Certain Pharmacy Permits" – would effectively shut down pharmacies across the state.
That, in turn, would lead to job losses and restricted access to care, the lawsuit claimed, and would also "deny access to lifesaving drugs at affordable prices" by high-end pharmacies.
The PBM also criticized the law for allegedly reforming the federal TRICARE program, which offers military benefits through private companies.
WHAT'S THE IMPACT
CVS claimed in its lawsuit that the Arkansas law discriminates against out-of-state businesses, thereby violating the Constitution's Dormant Commerce Clause, and flies in the face of multiple federal statutes, namely ERISA.
"The vast majority of PBM-affiliated pharmacies operating in Arkansas are out-of-state entities like CVS, Cigna, and Optum," CVS said in its lawsuit. "The vast majority of in-state pharmacies, by contrast, do not have a corporate affiliation with a PBM. As a result, HB l l 50's ban on PBM-affiliated pharmacies turns out to be a nearly perfect proxy for banning only out-of-state pharmacies. Remarkably, the law, as enacted, bars only out-of-state pharmacies from participating in the Arkansas marketplace."
CVS also said "the law violates the U.S. Constitution's Equal Protection Clause by banning CVS and most other PBM-affiliated pharmacies from Arkansas while providing an exemption designed to cover the only Arkansas-based pharmacy affiliated with a PBM, without a rational justification for this distinction."
The company criticized moves by state lawmakers to exempt Walmart, which owns and operates pharmacies, from the bill, claiming the bill's authors made an exception for the retail giant because it's the state's largest employer.
THE LARGER TREND
Arkansas Gov. Sarah Huckabee Sanders signed the bill in April.
According to Sanders, PBMs take advantage of this lax environment to inflate drug prices and cut off access to critical medications.
"These massive corporations are attacking our state because we will be the first in the country to hold them accountable for their anti-competitive actions, but Arkansas has never been afraid to be a conservative leader for America," said Sanders.
Arkansas Attorney General Tim Griffin concurred, saying PBMs have taken advantage of their position as price negotiators to benefit the pharmacies they own and operate. They do this, he said, by distorting the market and forcing out smaller, independent pharmacies.
"And Arkansas consumers lose because we pay higher prices for drugs we rely on every day," said Griffin.
Sanders previously announced $1.5 million in fines against four major PBMs that routinely skirted Arkansas law – the largest pharmaceutical enforcement action in Arkansas history. Last month, Griffin led a bipartisan group of 38 other state and territory attorneys general in writing a letter to congressional leadership requesting action to prevent anti-competitive PBM practices.
The "Big 3" pharmacy benefit managers – CVS Caremark, Express Scripts and OptumRx – mark up specialty drugs at their affiliated pharmacies by hundreds or even thousands of percent, according to an interim staff report published by the Federal Trade Commission in January.
Such significant markups allowed the largest three PBMs and their affiliated specialty pharmacies to generate more than $7.3 billion in revenue from dispensing drugs in excess of the drugs' estimated acquisition costs from 2017 to 2022, the report found.
Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.