Weak medicine for an ill system

Some of the most influential players in our healthcare system are three companies you may never have heard of.

They’re called prescription benefit managers, and they oversee the prescription-drug insurance plans offered by businesses, governments and other organizations.

And, if the attorneys general of California and 27 other states are correct, they’ve been pocketing money from pharmaceutical companies to steer patients into name-brand drugs.

The attorneys general announced a $9.5-million settlement last week with Express Scripts Inc., which handles the drug benefits of about 50 million workers.

The settlement with Express Scripts, the third-biggest prescription benefit manager, followed a $38.5-million settlement this year with rival CVS Caremark Corp. and a $29.3-million settlement with Medco Health Solutions Inc. in 2004. The three companies collectively administer prescriptions for more than 200 million people.

Each company denied any wrongdoing.

“We have not been doing what they claim we’ve been doing,” said Steve Littlejohn, an Express Scripts spokesman.

He said the company agreed to the settlement to put the matter behind it and avoid further legal costs.

“Now we can focus on what we do best,” he said. “Our whole thrust is to work to drive down costs.”

The settlements followed allegations from state officials that the companies enjoyed too-cozy relationships with drug makers that resulted in money changing hands to push favored medicines.

“What we found is that, very often, they would get rebates from the manufacturers but wouldn’t pass it along to the plans,” said Al Shelden, a senior official in California Atty. Gen. Jerry Brown’s office.

He was unable to provide a precise dollar amount involved but said it ran in the “multimillions.”

Along with administering drug insurance plans, prescription benefit managers run their own mail-order pharmacies. This lets them buy in bulk from drug makers and offer medicine at lower prices than conventional drugstores -- basically the same way Costco can undercut your local grocery store.

Prescription benefit managers keep lists of “preferred” drugs for which people will pay less than for non-preferred drugs. Typically, a drug will be preferred if a pharmaceutical maker cuts the wholesale price in return for greater access to a prescription benefit manager’s patients.

I can speak to the pluses and minuses of this system. I take a drug called Altace to lower my risk of cardiovascular troubles associated with diabetes. At the drugstore, my co-pay for Altace ran about $20 a month. Ordering online through my employer’s prescription benefit manager, Caremark, lowered my co-pay to $5.

I’m guessing Caremark moves a whole lot of Altace through its mail-order service, much to the satisfaction of the drug’s manufacturer, King Pharmaceuticals Inc.

Meanwhile, Caremark prompted me to switch from a blood-glucose meter I liked to one that I didn’t like as much because my meter wasn’t “preferred” by the company. My costs are lower with the preferred meter -- a crucial matter in managing a chronic ailment -- but it’s not the meter I want.

I wonder if the maker of Caremark’s preferred meter, Johnson & Johnson’s LifeScan Inc., paid handsomely to go to the head of the class.

The attorneys general alleged that, in certain instances, the three leading prescription benefit managers encouraged patients and their doctors to use preferred medicines but didn’t pass along rebates from drug makers in the form of lower co-pays.

Shelden, of the California attorney general’s office, also said prescription benefit managers received money from drug companies that wasn’t tied to specific medicines.

“Oftentimes the rebates were for the totality of all drugs that a prescription benefit manager gets from a manufacturer,” he said.

In other words, the prescription benefit manager had an incentive to switch as many people as possible from pills made by Pfizer, say, to pills made by Merck.

“These would be switches that patients and doctors would be told were being made because they’d cost less,” Shelden said. “That was often not true.”

Charlie Sewell, senior vice president of the National Community Pharmacists Assn., said the rebate system undermines the integrity of the pharmaceutical business. His group represents about 23,000 independent drugstores.

“Rebates are just another word for kickbacks,” he said.

Pharmaceutical Research and Manufacturers of America, the leading drug-industry group, wouldn’t comment on the Express Scripts settlement. A spokesman said the organization “does not collect information with respect to individual companies’ pricing decisions,” and therefore was unaware of rebates for preferential treatment by prescription benefit managers.

Express Scripts said $9.3 million of the $9.5-million settlement will go to the 28 states that investigated it.

The remaining $200,000 will be doled out in the form of $25 checks to each patient who was required to see a doctor to have a prescription changed to a preferred medicine.

Shelden said the settlements would introduce some transparency to how prescription benefit managers operate. But the accords won’t necessarily change how the business works.

“The cozy relationships between the prescription benefit managers and the pharmaceutical makers will remain,” Shelden said.

Sounds like some stronger medicine is needed.

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