State AGs Look Into Express Script's Drug Management Programs

July 29, 2004 ( - New York and Vermont are looking into the Express Script Inc' management of prescription drug plan for state employees for possible fraudulent dealings.

The pharmacy-benefits manager (PBM) said it received a July 12 notice from New York Attorney General Eliot Spitzer alleging breaches of contracts and violations of civil law regarding the prescription drug plan. Additionally, on July 21, 2004 the company received a Civil Investigative Demand from the Attorney General of the State of Vermont covering a wide range of business practices, the Maryland Heights, Missouri-based company said in its 10-Q filing with the Securities and Exchange Commission (SEC).

In the filling, Express Scripts acknowledged it was involved in discussion with Spitzer’s office and asserted the company’s belief that the state’s prescription drug plan was “administered the state’s plan in accordance with contractual and legal requirements.”

In addition to the notice received from Vermont and New York, Express Scripts also said the company has “been advised that we will receive, or have already received, substantially identical civil investigative demands” from 18 other states, including Arizona, Connecticut, Delaware, Illinois, Massachusetts, North Carolina, Oregon, Pennsylvania, Virginia and Washington. These demands seek documents regarding “a wide range of our business practices.” Express Scripts said it is cooperating with the investigations.

PBMs – operations that function as the middlemen in negotiating on behalf of their clients for discounts from drug manufacturers – have come under fire in recent years of alleged shady business dealings. In January, New York labor union the Organization of New York State Management Confidential Employees and United University Professions filed suit against Express Scripts alleging the company kept rebates paid by drug makers instead of passing those savings along to health plans. Additionally, the suit claims Express Scripts received kickbacks from drug manufacturers to recommend higher-priced drugs rather than more affordable alternatives (See Express Scripts Slapped With PBM Suit ).

Perhaps no PBM has felt the heat more than Medco Health Solutions Inc. Last year, the former Merck subsidiary was slapped with lawsuits from the US Justice Department (See Justice Department Slaps Medco With Civil Suit ) and the state of Ohio. Ohio alleged the PBM shortchanged the State Teachers Retirement System of Ohio (STRS) on its prescription drug coverage. This accusation was based on an audit conducted by STRS that estimated the PBM overcharged the system by $50 million between 1988 and 2001 (See Ohio STRS Sues Medco ).