Reimbursement for the Difference Between the Brand and Generic Drug
Graphic Communications Local 1B Health & Welfare Fund “A”, et al., Appellants, vs. CVS Caremark Corporation, et al., State of Minnesota Court Of Appeals, Case No. A12-1555 (May 6, 2013).
A recent decision by the Minnesota Court of Appeals reversed the dismissal of a case against pharmacies for not providing the financial benefit of generic substitution. The case was brought by certain union health benefit plans but initially dismissed by the lower court finding no private right of action under the generic substitution statute. The Minnesota Court of Appeals held that the plaintiffs could bring the case under Minnesota’s consumer fraud statute. Minnesota, like many states, has a provision in its generic substitution statute that requires pharmacies to pass on the difference between the cost of the brand and the generic drug. Thus, we may see cases like this arise in other states.
What may limit this from occurring is that most pharmacy provider agreements have differential pharmacy reimbursement rates depending on whether a brand name drug or generic is dispensed by the pharmacy. Thus, if the health plan or pharmacy benefits manager (“PBM”) has already contracted for a lower rate, it is difficult to see how these entities could bring such a challenge, or if they did, because the pharmacies have already agreed to a lower reimbursement scheme, the damages would likely be minimal.
Drug Manufacturer Coupon Programs
Plumbers and Pipefitters Local 572 Health and Welfare Fund v. Merck & Co. Inc. U.S. District Court, District of New Jersey, Case No. 12-137912-365212-7027 (April 29, 2013).
Merck & Co., Inc. had offered coupons to patients to off-set the cost of the co-payments for certain drugs dispensed. Union health plans challenged this practice in federal court in New Jersey on a number of grounds, essentially complaining that the coupons removed the co-payment incentive to patients to cost-shift to lower priced drugs. The plaintiffs brought claims under RICO, tortious interference with contracts and commercial bribery. The court found that the plaintiffs lacked standing to bring these claims, but it appeared to be that the complaint lacked sufficient allegations for the most part, so this case may be refiled with a different result.
An ironic twist regarding these drug manufacturer coupon programs is that the patients often have to provide their names and addresses in order to receive either the coupon or the payment from the drug manufacturer. After all the steps pharmacies take to keep this protected health information (“PHI”) confidential, and face stiff fines and penalties if they fail to do so, the patient willingly provides this PHI to the drug manufacturer, often in exchange for a $10 coupon. The drug manufacturers end up receiving much desired marketing and tracking information which would otherwise be PHI if provided by the pharmacies.
Medicare Part D Preferred Provider Rule Challenge Dismissed for Failure to Exhaust Administrative Remedies
Southwest Pharmacy Solutions Inc. v. Centers for Medicare and Medicaid Services, U.S. Court of Appeals, Fifth Circuit, Case No. 12-40097 (May 1, 2013).
Plaintiff, a coalition of independent pharmacies operating in Texas, Arkansas, Louisiana, New Mexico, Oklahoma, Missouri, Mississippi, and Tennessee (“Pharmacies”) brought a federal court challenge to the preferred pharmacy provisions in Medicare Part D that allow plan sponsors to allow reduced co-payments and co-insurance if a preferred pharmacy is utilized. The federal district court determined that the Pharmacies had to first bring the claims with CMS and “exhaust their administrative remedies” before bringing the claim in federal court. The appellate court agreed, though it appears that there may be other avenues for the Pharmacies to bring the challenge. The Pharmacies had essentially contended that allowing the preferred pharmacy provisions in Medicare Part D was inconsistent with the “any willing provider” provisions of Medicare Part D. The challenge may not be over, and the Pharmacies could regroup and try another strategy.