7/21/2011

DealingwithPBMs:
CanIhaveanaspirin?

DAVIDBALTO
LawOfficesofDavidA.Balto David.Balto@dcantitrustlaw.com 2027895424

RoleofPBM:TheHonestBroker?
PBMsareintendedtoserveashonestbrokersbetween drugmanufacturersandplans
Handlepharmaceuticalclaimsforhealthplans Seeklowestcostfrommanufacturersandreimbursementfrom pharmacies Setuppharmacynetworks Admin. Services, ,
Discounts/Rebates Plans

Discounted drug prices, claims data

PBM

Payment for drugs, Admin. fees

Rebates/fees Pharms Payment for drugs Payments for mail-order drugs Drug Mfr

COMPETITIONLESSON1
3ElementsNecessary:
Choice Transparency LackofConflictof Interest

7/21/2011

PBMIndustry
TheBigThreecontrolover80%nationalPBM market. Profitsclimbnearlythreefoldfrom2003to2010, fromover$900milliontoover$3.6billion

--Hospitals and Pharmacies--

PBMPharmacyRelationship
Retail pharmacies are generally offered a take it or leave it deal to be included in the network, with only the largest pharmacy chains having any ability to negotiate with the PBMs."
Allison Dabbs Garrett & Robert Garis, Leveling the Playing Field in the Pharmacy Benefit Management Industry.

PBM

Pharmacy 5

TheReimbursementProblem
PBMsmakemoneyplayingthespread
Pocketingsavingsachievedonbehalfofplan

NewAreaforPBMprofits:340bRebates
Whose Wh rebate b is i it? i?

340b

7/21/2011

PotentialResponses
Informationsharing Collectivenegotiations Publicawareness Advocacy

PastPBMEnforcementActions
Multistateenforcementactionsresultinginover$371.9 millionindamages:
UnitedStatesv.Merck&Co.,Inc.,et.al $184.1millionin damagesforgovernmentfraud,secretrebates,drugswitching, andfailuretomeetstatequalityofcarestandards. UnitedStatesv.AdvancePCS(nowpartofCVS/Caremark) $137.5millionindamagesforkickbacks,submissionoffalse claims,andotherrebateissues. UnitedStatesv.Caremark,Inc. pendingsuitalleging submissionofreversefalseclaimstogovernmentfunded programs. StateAttorneysGeneralv.Caremark,Inc. $41millionin damagesfordeceptivetradepractices,drugswitching,and repacking. StateAttorneysGeneralv.ExpressScripts $9.5millionfor drugswitchingandillegallyretainingrebatesandspread 8 profitsanddiscountsfromplans.

PBMREFORM
States:Reformlegislationproposedinover 20states Focus:Transparencyandfiduciaryduty EnactedinD.C.,Iowa,SouthDakota, Maryland,Vermont,Arkansas PatientProtectionandAffordableCareAct DepartmentofLaborRegs
9

7/21/2011

PPACAHealthReform: PBMTransparency
Appliestoplansinthestateoperatedexchanges (privateandFEHBPadministeredplans)andPart Dplans PBMstoreporttotheSecretaryandcontracting planson:
Retailvsmail;genericdispensingrates; Aggregatemanufacturerrebatesearnedandpassed throughtotheplan AggregatepaymentsfromplanstoPBMsand subsequentpaymentstopharmacies
10

PendingPBMLegislation
HR1971/S1058:PharmacyCompetitionandConsumerChoice Act IntroducedintheHousebyMcMorrisRogersandWeinerand intheSenatebyPryorandMoran AnyWillingProvider,protectingpatientchoice Protectingprivacy:datacouldnotbetradedasacommodity byPBMswithoutthehealthplanbeingnotifiedfirst.Plus, patientswouldnolongerreceivesolicitationsfromPBMs unlessthepatientandhealthplanoptedintosuch solicitations. Protectionfromaudits:nolongerthan2years,nomore stringentthanrequiredbylaw,typographicalerrorsnot subjecttorecoupment
11

PendingPBMLegislation
HR1839:CommunityPharmacyFairnessAct IntroducedbyWeiner Antitrustexemptionforpharmaciesbutnotapplicableunder specifiedfederalprograms. Entitlesindependentpharmaciesnegotiatingcontractwith healthplanstothesametreatmentundertheantitrustlaws asthetreatmenttowhichbargainingunitsrecognizedunder theNationalLaborRelationsActareentitled. Treatsapharmacyasanemployeeengagedinconcerted activitiesinconnectionwithsuchnegotiations.

12

7/21/2011

PendingPBMLegislation
HR1946:PreservingOurHometownIndependentPharmacies Actof2011 IntroducedbyMarino Treatsindependentpharmaciesnegotiatingahealthplansthe sameundertheantitrustlawsasanemployeeengagedin concerted t dactivities, ti iti and dnot tasanemployer, l i independent d d t contractor,managerialemployee,orsupervisor,onlyin connectionwithsuchnegotiations. ExemptsactionstakeningoodfaithrelianceonthisActfrom beingsubjecttocriminalsanctionsorcivilpenaltiesbeyond actualdamagesincurred.

13

CEQuestion
TrueorFalse?PBMindustryprofitsclimbed nearlythreefoldfrom2003to2010,fromover $900milliontoover$3.6billion.

14

CEQuestion
True.

15

7/21/2011

Questions?
DavidA.Balto
AttorneyatLaw 1350EyeStreetNW Suite850 Washington,DC20005 (202)7895424 David.Balto@dcantitrustlaw.com

16