West Virginia Sues Medco Over Drug Costs

November 14, 2002 (PLANSPONSOR.com) - Medco Health Solutions has been sued by the West Virginia attorney general for allegedly keeping rebates handed out by the drug companies that were intended for the state, according to a Wall Street Journal report.

The suit alleges that West Virginia’s 200,000 state employees were directed to higher priced drugs because of millions of dollars in rebates from drug makers being received by Medco, Merck & Co’s pharmacy benefits subsidiary.

West Virginia contends they had an agreement with Medco by which all but 5% of the total rebates were to be passed back to the state.   Medco violated this agreement by keeping more than its share of those rebates, according to the suit.

Medco operated as West Virginia’s pharmacy benefit manager (PBM) from June 2000 to July 2002.   PBMs are designed to assist individuals reduce drug costs by pooling millions of requests to get rebates and discounts from drug makers and are currently utilized by 200 million Americans.  

Recently, a group of state attorney generals have been discussing problems with PBMs, in particular the lack of information as to what part of their revenue comes form rebates and what part from processing claims.    West Virginia’s suit could spark other states to file similar suits in the future, according to the report citing people familiar with the industry.