Category: General

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.

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.

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.

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.