Express Scripts Slapped With PBM Suit

January 12, 2004 ( - A St Louis-based pharmacy benefit manager (PBM) has become the latest to be hit with charges that it pocketed drug company rebates and inflated drug prices.

Two New York labor groups made the charges in a lawsuit against Express Scripts, the nation’s third largest PBM, according to an Associated Press report. The lawsuit was filed December 31 in state Supreme Court in New York City and announced Sunday by the Organization of New York State Management Confidential Employees and United University Professions, which represent more than 30,000 state workers.

Pharmacy benefit managers are essentially the middlemen that negotiate on behalf of their clients for discounts from drug manufacturers.

As has been the case previously with other PBMs (See Ohio STRS Sues Medco ), the latest suit accuses Express Scripts of deceptive practices, such as keeping rebates paid by drug makers instead of passing those savings along to health plans. Express Scripts also received kickbacks from drug manufacturers to recommend higher-priced drugs rather than more affordable alternatives, the suit said.

“Our members are being shortchanged, and the taxpayers of New York state are being shortchanged,” William Scheuerman, president of United University Professions, said in a statement. The lawsuit seeks undisclosed monetary and punitive damages. Express Scripts provides pharmacy benefit management for 1.1 million current and retired state workers under a contract that expires at the end of 2005.

The New York suit is the latest in a series of criticisms of for-profit pharmacy benefit management companies. Several states are investigating whether the companies’ practices violated antitrust laws. Last January, nine states and the District of Columbia said they would organize a nonprofit group to buy drugs for both state employees and Medicaid patients, eliminating the corporate entity in the middle. The National Legislative Association on Prescription Drugs hopes to have the nonprofit operational by this year (See 9 States and DC Team Up to Assume PBM duties ).