Ohio Attorney General Charges Pharmacy Benefit Companies With Price Fixing
Health Care

Ohio Attorney General Charges Pharmacy Benefit Companies With Price Fixing

© Lucas Jackson / Reuters

Ohio Attorney General Dave Yost filed suit Monday against several companies that manage prescription drug benefits, accusing them of colluding to drive up drug prices, contrary to their stated business purpose.

The lawsuit says that industry consolidation has left three large players controlling more than 75% of the pharmacy benefit management (PBM) market, with tremendous power over prescription drug pricing and reimbursement rates. It alleges that Cigna Group, Humana and Prime Therapeutics used a Swiss subsidiary to coordinate pricing and share information, “effectively eliminating all competition between themselves” and gaining leverage in negotiations with drugmakers. The suit charges the companies with violating Ohio’s antitrust law.

“Defendants have morbidly manipulated both sides of the market, demanding higher drug prices while negotiating larger fees from the manufacturers,” the lawsuit alleges. “Patients pay more, manufacturers get less, and the PBMs profit.”

What are these companies? “The companies play a largely hidden but important role in the prescription-drug supply chain, serving as middlemen among the companies that make drugs, the health insurers that pay for the treatments and the pharmacies that dispense them,” Jared S. Hopkins writes at The Wall Street Journal. “Governments, employers and unions hire PBMs to manage their payments for prescription medicines. In addition to processing payments to pharmacies, the PBMs aim to control spending by deciding which drugs they will pay for depending on the rebates they negotiate with pharmaceutical companies.”

The battle over prescription drug pricing has seen plenty of finger-pointing between drug companies, insurers and pharmacy benefit managers, with Republicans frequently defending the pharmaceutical companies and lining up against the PBMs. Critics say that the benefit managers, rather than keeping costs down, lead to inflated drug prices because they can then negotiate larger rebates and make more money themselves.

Yost, a Republican, called PBMs the disease plaguing drug pricing and the attorney general’s office noted that his filing differs from other similar lawsuits in that “it targets PBMs only, not the pharmacies or manufacturers that are being strong-armed by PBMs.”

“PBMs are modern gangsters,” Yost said in a statement. “They were designed to protect and negotiate on behalf of employers and consumers after Big Pharma was criticized for overpricing medications, but instead they have absolutely destroyed transparency, scheming in the shadows to control drug prices on all sides of the market.”

The Pharmaceutical Care Management Association, an industry trade group, argues that its members lower drug costs and that pharmaceutical companies are the fundamental drivers of high prices.