A Lonoke pharmacy is suing six of the largest pharmacy benefit managers in the country, saying it won’t be able to survive because the drug reimbursement rates it receives from the PBMs are often below its cost.
Lackie Drug Store Inc. also accused the PBMs of trying to force it — and other independent pharmacies — out of the marketplace or to sell their pharmacies to a larger pharmacy that is “controlled, operated and preferred by a PBM,” according to the lawsuit, which was first filed in Lonoke County Circuit Court in November and has since been moved to U.S. District Court in Little Rock.
“The reimbursement structure is completely variable,” Brandon Achor, a pharmacist and co-owner of Lackie Drug Store, said last month in the lobby of the pharmacy. “It’s opaque and completely arbitrary.”
Achor said Lackie Drug has lost about $50,000 annually as a result of PBM reimbursements. “When you see such dramatic losses like that, no business can sustain that,” he said.
Lackie Drug Store filed the lawsuit in November, a month before the U.S. Supreme Court unanimously ruled that the state of Arkansas could regulate PBMs. The Pharmaceutical Care Management Association, which represents PBMs, had challenged the 2015 Arkansas law in federal court.
PBMs say they help hold down drug costs by negotiating with manufacturers on behalf of insurance companies and by providing pharmacists with instant approval of drug benefits.
But independent pharmacies say PBMs are middlemen who aren’t transparent about the real cost of drugs, with the ability to force retail pharmacies to choose between selling medicine at a loss or turning away patients.
A part of the 2015 Arkansas law says PBMs can’t force pharmacies to take a loss when filling a prescription. Achor said that prohibition is being ignored. And more pharmacies could be filing lawsuits against the PBMs, said Scott Poynter of Little Rock, one of the lawyers representing Lackie Drug.
Poynter recently told Arkansas Business that his firm also represents about 70 pharmacies that are considering filing a class-action lawsuit against the PBMs. There are about 400 independent pharmacies in Arkansas.
Lackie is seeking an unspecified amount of damages, but the PBMs could face penalties of $10,000 per transaction that violate the law, Poynter said. “So that’s a substantial amount of money.”
CVS Health Corp. of Woonsocket, Rhode Island, which operates one of the largest PBMs in the country and the CVS Pharmacy retail chain, is named as a defendant in Lackie’s suit.
“We are committed to adhering to all laws and regulations applicable to our business,” CVS Health said in an email to Arkansas Business. “The allegations in this complaint have no merit and we plan to aggressively defend against them.”
Also named as a defendant is the Pharmaceutical Care Management Association of Washington, which represents PBMs. It did not return calls for comment.
Meanwhile, John Vinson, CEO of the Arkansas Pharmacists Association, said he is meeting with the state attorney general’s office to determine how it will use the Supreme Court’s recent decision “to better enforce the existing laws we have.” Then Vinson will pass that information to its pharmacists.
A pharmacist’s time for appealing an under-reimbursement would generally be spelled out in the PBM contract, Stephanie Sharp, a spokeswoman for Arkansas Attorney General Leslie Rutledge, said in an email to Arkansas Business.
There also appears to be legislation planned for the upcoming session regarding prescription drug prices, Rep. Vivian Flowers, D-Pine Bluff, told Arkansas Business last week. Flowers and Rep. Reginald Murdock, D-Marianna, held a virtual town hall meeting on prescription drug costs last week. “I anticipate that we will see a lot of legislation come forth to address the cost issues around pharmaceutical drugs,” she said.
Flowers also said it might be time to redefine what PBMs are allowed to do. “We can’t make them the bad guy in every instance when the law allows them to do what they do,” Flowers said.
As part of the 2015 law, PBMs are required to make timely updates to their maximum allowable cost list, which allows the pharmacist to know the reimbursement rate of the drug before filling the prescription, the lawsuit said.
But Achor said pharmacists often don’t know when they’re filling the prescription whether they’re going to lose money because it’s unclear what the reimbursement rate will be.
Achor said he has a patient who has been using a hormone replacement cream that’s been covered by insurance. The cream costs more than $100, and in previous months the insurance carrier paid Lackie Drug $120 for the medication. But in December, “I ran the claim, and they paid me $8,” Achor said. “That is not a minute amount. It is making the decision to turn away prescriptions or take care of the people and honestly make tough business decisions.”
He said situations like that happen monthly. Or in some cases, he said, the PBMs will “pay me barely above cost in January,” but then charge the pharmacy a fee several months later for fulfilling that claim, resulting in a net loss.
Lackie Drug’s lawsuit is also asking the judge to order PBMs to comply with the 2015 statute, which includes providing access to the maximum allowable payments and the methods used to set the prices. The list is also required to be updated in a timely manner.
“Those are all sections within this statute that have never been followed,” Poynter said. “So we intend really to demand those protections in the act initially for the pharmacist before moving to damages.” Achor said he feels he has to take PBM contracts; otherwise, “I’m not going to work with 90% of the population of Arkansas.”
Also troubling for Lackie Drug was a limited audit of three PBMs — CVS/Caremark, OptumRx of Irvine, California, and Express Scripts Inc. of St. Louis — done for the Arkansas Insurance Department. OptumRx and Express Scripts are also defendants in the case. The audit covered a six-month period that ended June 30, 2019, and the report was completed July 27, 2020.
That report showed that national chain pharmacies were reimbursed more, which the audit defined as greater than a 5% difference, than regional chains and independent pharmacies for the same drug product unit, such as a tablet or capsule.
The audit also said, however, that “it does not provide a complete picture of pharmacy costs and PBM compensation. There are a number of additional factors that impact PBM revenues and pharmacy reimbursements that were either outside of the scope of this report or unavailable due to the lack of PBM response.”
In the lawsuit, Lackie Drug alleged the PBMs and their affiliates knew about the price discrepancy and were using the low prices as an attempt to drive Lackie Drug and other independent pharmacies either out of business or force them to sell to a PBM affiliate.
“A lot of pharmacies, and luckily Lackie Drug isn’t one of these, have really gone out of business because of this practice, or have been forced to sell their pharmacies because they can’t do it anymore,” Poynter said.
Lackie Drug’s allegations against the defendants include violation of the Arkansas Deceptive Trade Practices Act, violation of the Unfair Practices Act and conspiracy.
As of Thursday, the defendants hadn’t filed their answer in the case.