Christopher H. Casey – State Attorneys General Blog

July 22, 2024 by Christopher H. Casey

Vermont Attorney General Sues Two of Largest PBMs for Driving Up Drug Prices

On July 17, 2024, the Vermont Attorney General, Charity R. Clark, filed a lawsuit in Vermont Superior Court against two of the largest pharmacy benefit managers (“PBMs”) in the country, CVS Caremark and Express Scripts. The suit alleges that these two PBMs—which, according to the complaint, together control approximately 95% of the commercial PBM market in Vermont—have violated the Vermont Consumer Protection Act by engaging in deceptive and unfair practices that have had the effect of driving up pharmaceutical prices for consumers and squeezing independent pharmacies.

The Vermont AG’s complaint alleges that because they control which drugs are placed on the formularies, CVS Caremark and Express Scripts are able to extract payments from the manufacturers in return for favorable placement, which the PBMs retain as profits instead of passing along to payors and patients. It alleges that these PBMs drive up drug prices by giving preference on their formularies to drugs with high list prices—and correspondingly high manufacturer payments—over lower priced drugs. The complaint also alleges that CVS Caremark and Express Scripts pay lower reimbursement rates to pharmacies that are not affiliated with them, resulting in harm to independent pharmacies.

The allegations in the Vermont complaint echo the Federal Trade Commission’s interim conclusions of its ongoing study of the PBM industry.

July 18, 2024 by Christopher H. Casey

Coalition of 11 State Attorneys General Call for Increased Efforts to Rein In Private Equity in Healthcare

On June 5, 2024, the Attorneys General of California, Connecticut, Delaware, Illinois, Minnesota, New Jersey, Oregon, Pennsylvania, Rhode Island, Washington, and Washington D.C. submitted a 29-page comment letter in response to the Request for Information on Consolidation in Healthcare Markets issued jointly by the U.S. Department of Justice Antitrust Division (DOJ), the Federal Trade Commission (FTC), and U.S. Department of Health and Human Services (HHS). In the letter, the attorneys general expressed their concern about the adverse effects of consolidation in healthcare markets, particularly through transactions driven by private equity.

In particular, antitrust enforcers have focused on private equity “roll-ups”, consolidation of multiple smaller providers into a larger provider network. Over the last 14 years, healthcare consolidation propelled by private equity has steadily increased; between 2010 and 2020, the estimated private equity deal values in healthcare totaled about $750 billion. Many of those transactions involved the acquisition of physician practices, hospices, nursing homes, hospitals, and behavioral healthcare facilities. In their letter, the attorneys general stated, without empirical evidence, that this consolidation has led to increased prices, decreased access and quality of care, and harm to patients and communities.

The attorneys general urged the DOJ, FTC, and HHS to “explore all avenues to prevent conduct by private equity in healthcare that harms patients, healthcare workers, and taxpayers who often end up footing the bill.” They made several concrete recommendations, including (1) increased transparency of ownership and payments; (2) a ban on anticompetitive contracting in federal programs; and (3) joint enforcement against anticompetitive conduct and mergers. The letter shows that a significant number of states are ready to partner with federal authorities in reining in private equity’s influence in health care.

July 10, 2024July 10, 2024 by Karen Lehmann Alexander

Coalition of State Attorneys General Supports Registry of Consumer Protection Law Violations

On June 11, 2024, the attorneys general of New York, California, Colorado, Connecticut, Illinois, Maryland, Minnesota, Oregon, Pennsylvania, and Vermont wrote a letter to Rohit Chopra, the Director of the Consumer Financial Protection Bureau (CFPB), in support of the CFPB’s Nonbank Registration of Orders Rule. The Rule, which becomes effective September 16, 2024, will require nonbank entities that offer consumer financial products and services to register with the CFPB all final orders issued by courts or by federal, state, or local law enforcement agencies finding violations of consumer protection laws. The CFPB will use this information to compile a searchable online registry available to the public. Failure to register will be a violation of federal consumer financial law subject to CFPB enforcement, and remedies include potential civil monetary penaltie

In their letter, the state attorneys general stated that they support the Rule because the registry will enable them to spot emerging problems and engage in early prevention efforts. They also believe that the registry will be useful in prioritizing certain targets of investigations over others, targeting state-level or regional actors that might not draw attention from federal agencies, and negotiating resolutions with entities engaged in similar conduct.

Nonbank entities that offer consumer financial products and services should ensure that they are in compliance with the Rule following its effective date. Such entities should also be aware that the registry could result in increased enforcement from the CFPB and state attorneys general. As the state attorneys general point out in their letter, the registry may also be useful to such entities in identifying instances of specific conduct that courts or agencies have previously determined to be unlawful, deceptive, unfair, or abusive, and to shape their own marketing and compliance efforts accordingly.

June 28, 2024 by Christopher H. Casey

State Attorneys General Urge Supreme Court to Protect State Regulation of PBMs

A group of 32 state attorneys general filed an amicus brief on Tuesday, June 11, urging the Supreme Court to review a Tenth Circuit decision which held that federal law—specifically ERISA and Medicare Part D—preempted sections of an Oklahoma state law regulating pharmacy benefit managers (“PBMs”), and that those sections were therefore unenforceable.

PBMs act as intermediaries in the health care system—they manage prescription drug benefits, including by negotiating discounts, rebates and fees with drug manufacturers, creating drug formularies (lists of medications that are covered by insurance) and policies, and reimbursing pharmacies for drugs covered by prescription-drug plans. In their amicus brief, the attorneys general argue that states should be allowed to regulate PBMs. The attorneys general argue that PBMs have become too powerful, have contributed to higher drug costs, and have devastated independent pharmacies, which disproportionately serve minority populations.

A Supreme Court decision could provide guidance to states (all 50 states have laws regulating PBMs to some degree) concerning the limits of state regulation of PBMs. Recognizing the importance of a potential decision, multiple pharmacy-related associations have joined the attorneys general in filing amicus briefs in support of state regulation of PBMs (including one filed by Duane Morris on behalf of the National Association of Specialty Pharmacy). Their briefs echo the attorneys general’s brief in addressing the market impact of PBMs and their impact on vulnerable communities.