Interim Attorney General Peter J. Nickles announced today that he and attorney generals from 28 states have entered into a settlement with Caremark Rx, L.L.C., one of the nation’s largest pharmacy benefits management (PBM) companies.
The multi-state claim alleges that Caremark and its subsidiaries persuaded doctors to switch patients to different prescription drugs without disclosing its own financial motivations for doing so or possible side effects for the patients. The District will file its complaint with the settlement today in DC Superior Court.
As part of the settlement, Caremark is required to significantly change its process for switching patients from the drugs originally prescribed by their doctors. In addition, Caremark will pay $38.5 million to the states, including $22 million to benefit low-income, disabled or elderly consumers of prescription medications, to promote lower drug costs for state residents and to educate consumers about the cost differences among medications.
The District’s share of the settlement includes $152,750 for prescription drug assistance and $300,000 for the District Government’s consumer protection fund. District residents will also be included in a national compensation program for patients who were switched to certain cholesterol-lowering drugs.
PBMs enter into contracts with employers and government health plans to process prescription drug claims for drugs provided to patients enrolled in the health plan, negotiate with drug companies to obtain volume discounts, negotiate with participating retail pharmacies to obtain dispensing services at a discount, and dispense drugs to patients through PBM-owned mail order pharmacies. In the thirty years since the first PBMs appeared, their services have evolved to include complex rebate programs, extensive pharmacy networks, and drug utilization reviews.
The settlement generally prohibits Caremark from soliciting drug switches when:
- The net cost of the proposed drug exceeds the net cost of the originally prescribed drug;
- The cost to the patient for the proposed drug will be greater than the cost to the patient for the originally prescribed drug;
- The originally prescribed drug has a generic equivalent and the proposed drug does not;
- The originally prescribed drug’s patent is expected to expire within six months; or
- The patient was switched from a similar drug within the last two years.
The settlement requires Caremark to:
- Inform patients and prescribers what effect a drug switch will have on a patient’s co-payment
- Inform prescribers of Caremark’s financial incentives for certain drug switches
- Inform prescribers of material differences in side effects or efficacy between prescribed drugs and proposed drugs
- Reimburse patients for out-of-pocket expenses for drug switch-related health care costs and notify patients and prescribers that such reimbursement is available
- Obtain express, verifiable authorization from prescribers for all drug switches
Inform patients how they may decline a drug switch and receive the originally prescribed drug
- Monitor the effects of drug switches on the health of patients
- Adopt a specified code of ethics and specified professional standards
- Refrain from making any claims of savings for a drug switch to patients or prescribers unless Caremark can substantiate the claims
- Refrain from restocking and re-shipping returned drugs unless permitted by applicable law
- Inform prescribers that visits by Caremark’s clinical consultants and promotional materials sent to prescribers are funded by pharmaceutical manufacturers, if that is the case.
This settlement is the result of a multi-state investigation led by the Attorneys General of Maryland and Illinois. Joining the settlement are the District of Columbia, and the states of Arizona, Arkansas, California, Connecticut, Delaware, Florida, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nevada, New Mexico, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Vermont, Virginia and Washington.