Express Scripts Fine Settles PBM Mess -- For Now

(MoneyWatch)  Express Scripts, a big "pharmacy benefit management," or PBM, provider, yesterday agreed to pay $9.5 million in order to settle looming state lawsuits centered on allegations that it monkeyed with patient prescriptions in order to reap bigger rebates from drugmakers.

The payment, of course, is a mere slap on the wrist to Express, which claims to handle prescriptions for 50 million Americans and which earned $568 million last year on revenues of $18.3 billion. PBMs like Express are the middlemen of the pharmaceutical industry -- they buy drugs in bulk and supply them to pharmacies and to patients via home delivery. Along the way, they carry out a variety of studies on drug cost-effectiveness intended, they say, to help pharmacies and health plans offer the best prescription-drug plans for the lowest cost. Sometimes PBMs encourage patients to switch to comparable drugs -- usually to generic versions, but sometimes to other brand names -- as part of their efforts to keep costs low.

As it turns out, though, Express and its fellow PBMs may have also taken advantage of their privileged position in the supply chain to fatten their own wallets. The states charged that Express and fellow PBMs Medco Health Solutions and CVS Caremark had illicitly switched patients from one brand-name cholesterol drug to another in order to make more money -- specifically by boosting their market share of particular drugs, which in turn earned them higher rebates. From Dow Jones:

The agreement states that Express Scripts "engaged in deceptive business practices by encouraging doctors to switch patients to different brand name prescription drugs and representing that the patients and/or health plans would save money," according to the Vermont attorney general's office.

The question was market share; the higher the PBM's market share of sales of a certain drug, the bigger the rebate it would get from the drug's maker....

Of course, no one has acknowledged any wrongdoing, and all three companies entered into "voluntary" agreements with the 29 states involved (plus D.C.) that prohibit them from a variety of activities:

The agreement prohibits Express Scripts from asking for a switch to a higher-priced drug, asking for a switch when the patent on the original drug is to expire, or asking for a switch if a patient already has been shifted from a similar drug in the past two years.

All of which is fine so far as it goes. Still, as if we needed one, this situation is yet another example of the corrosive effects that screwy financial incentives are having on the healthcare system. Drugmakers are obviously interested in currying favor with PBMs, who in turn are understandably interested in scooping up the best rebates possible without obviously compromising patient safety. Like everyone else in the system, PBMs claim to be looking out for patients -- but when patient interests come into conflict with their bottom lines, guess which gives way.

So these voluntary agreements may settle things down for now, but they're not going to do anything in the long run to address the ongoing tension between what companies like PBMs get paid to do and the role they're ostensibly playing in the healthcare system.