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Pharmacists' group files lawsuit over N.Y. policy

Rochester Business Journal
November 23, 2012

A community pharmacists' trade group has filed a lawsuit seeking to reverse a temporarily halted state Department of Health policy that would let Medicaid HMOs force enrollees to get some prescription drugs from mail-order pharmacies.
The suit, which seeks class-action status, was filed in a state Supreme Court in Albany last month. Five New York City independent pharmacies and one in Niagara County, along with two anonymous Medicaid patients and the Albany-based trade group, the Pharmacists Society of the State of New York, are lead plaintiffs.
The court case is the most recent skirmish in an ongoing battle between the Pharmacists Society and pharmacy benefit managers such as CVS Caremark Corp. and Express Scripts Inc., which recently merged with Medco Health Solutions Inc. The third-party drug-benefit administrators develop formularies and manage drug claims for health insurance carriers.
Known as PBMs, benefit managers own the mail-order houses they steer health plans' drug business to, creating a clear conflict of interest in his organization's view, said Craig Burridge, executive director of the Pharmacists Society.  
In addition to the Department of Health and state Health Commissioner Narav Shah M.D., the lawsuit names the state's director of pharmacy programs, Janet Zachary-Elkind, a onetime Express Scripts vice president and former Empire BlueCross BlueShield official, as a defendant.
DOH spokesman Jeffrey Hammond declined to comment, citing a DOH rule against speaking on pending litigation.
Other than sending close to $1 billion a year in taxpayer dollars to out-of-state firms instead of to New York-based businesses, the Health Department policy accomplishes nothing, Burridge maintains. To the contrary, he insists, allowing Medicaid managed-care plans that require subscribers to order some prescription drugs through the mail hurts fragile seniors and saves the state no money.
The policy stands in direct contradiction to the state's Anti-Mandatory Mail Order law, said Pharmacists Society attorney Linda Clark, a partner in Hiscock & Barclay LLP's Albany office.
The anti-mail-order law bars insurance plans from forcing enrollees to use mail-order pharmacies. It also forbids insurers from using rules such as higher co-pays or smaller refill allowances for locally filled prescriptions to move subscribers into mail-order prescriptions. The law requires independent, local druggists to match any cost savings mail-order drug suppliers offer.
The society lobbied for the law's adoption. The bill was signed into law by Gov. Andrew Cuomo at the end of 2011.
After its passage, the society took the position that the law banned all insurers from forcing enrollees to use mail-order drug suppliers, but state Medicaid officials believed otherwise, Clark said. At the society's urging, the Legislature passed an addendum to the law specifically applying the law to Medicaid. But the addendum also carved out a list of excluded "specialty" drugs named on the Final Criteria and Exclusive Pharmacy Network Drug List. Virtually all are high-cost, high-profit items, Clark said.
The specialty-drug carve-out affects only Medicaid HMOs. Enrollees in traditional, fee-for-service Medicaid can get all prescriptions filled locally.
Managed-care Medicaid plans, such as the locally based and Excellus BlueCross BlueShield-affiliated Monroe Plan for Medical Care HMO, which covers Monroe County Department of Social Services clients, are privately run and function much like group plans offered by private carriers. 
"The beneficiaries (of the state's Medicaid HMO exceptions) are ... PBMs, which frequently pocket large profit margins using an opaque reimbursement scheme based upon high volume," Clark maintained in an email. 
PBMs disagree, contending the mail-order houses they own save money and offer service as good as or better than local druggists.
The Pharmaceutical Care Management Association, a Washington-based PBM trade group representing Express Scripts, CVS Caremark and other PBMs as well as for-profit insurers such as Aetna Inc., credits its PBMs and mail-order pharmacies with helping government insurance programs achieve billions of dollars in savings. A study commissioned this year by the group estimates that mail-order pharmacy savings could total $47 billion over the next 10 years.
"With the help of pharmacy benefit managers, (Medicare's) Part D (prescription drug program) sponsors continue to exceed expectations in terms of savings, choice and satisfaction in Medicare," PCMA president and CEO Mark Merritt said in a statement issued as part of the association's recently launched "That's What PBMs Do" ad campaign.
A glowing review on the PCMA website highlighted savings achieved through reforms of New York's Medicaid kicked off by Cuomo last year. The PBM trade group maintains the state can save even more money once it "tap(s) into the savings available through affordable pharmacy networks and targeted use of mail-service pharmacy."
The Anti-Mandatory Mail Order law provision requiring local druggists to match mail-order prices negates the PBMs-save-money argument, Clark said. And mail-order drug suppliers often provide worse service than community pharmacists, she maintained.
The so-called list of specialty drugs included in the Department of Health carve-out is not recognized by any other agency, and drugs on the list can be as easily and often more safely supplied by local pharmacies, the Pharmacists Society's Burridge said. Rather than offering Medicaid HMOs savings, the PBMs cut deals with pharmaceutical companies to boost their mail-order subsidiaries' profits, he believes. 
An affidavit filed by one of the Medicaid plaintiffs in the class action, identified as a liver transplant patient with hepatitis C, details poor service by CVS Caremark. On one occasion, the mail-order pharmacy sent 20 pills instead of a month's supply, the patient states.
On another, it claimed to have contacted the patient's physician after failing to receive a prescription authorization but, according to the doctor, had never done so. The consequences of not taking the required medication could include death, the patient states.
A HIV-positive Medicaid plaintiff complains in a separate affidavit that heat-sensitive drugs and supplies languished in an unrefrigerated processing center for days after a Federal Express delivery from a mail-order pharmacy went awry because the patient was not at home to sign for it. A representative of the mail-order house advised the patient to drive to the processing center and pick up the medication. But the patient, knowing the drugs would be ruined for lack of refrigeration, refused. A 30-day supply of pills had melted into a single, solid clump.
The pharmacy eventually sent a replacement, the patient states. "(But) it took two days before their regional manager let me know that the shipment would finally be sent out. Luckily, I had only missed one dose of HIV medications before this shipment arrived."
In an agreement between the society and Department of Health last month, the state's specialty drug list, which was to have gone into effect Oct. 8, is on hold pending the lawsuit's outcome.

11/23/12 (c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email

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