A South Texas county drags PBMs into nationwide lawsuit over opioids

DATE: February 26, 2018

Published by STAT

A massive lawsuit over the nation’s opioid crisis has largely ignored an influential group of companies in the prescription drug business — the financial middlemen who brokered access to the powerful pills that got so many people hooked.

Perhaps that’s because their role is simply harder to see. Known as pharmacy benefit managers (PBMs), these companies secretly make the rules that determine the availability of drugs, and how much patients must pay out of pocket to get them.

But now a community in South Texas is calling PBMs into the fight, filing what its lawyers believe is the first case in the country to name these companies as defendants in a municipal opioid lawsuit.

The complaint in Webb County — which has a population of about 270,000 near the border with Mexico — was filed in January. And earlier this month it was absorbed into a larger lawsuit in Ohio that aggregates claims from cities and states across the country. That, in turn, could put these companies on the hook nationwide for settlement dollars and court orders meant to change the way the drug industry operates.

Joanne Cicala, a lawyer who represents Webb County, said PBMs enabled the opioid crisis and profited from the sale of the drugs that fueled it. “We see them as an absolutely essential part of this scheme,” Cicala said. “They made sure these drugs were dispensed and they controlled their flow out into the communities.”

The county’s suit includes claims against three PBMs that control most of the U.S. market — Express Scripts, CVS Health, and OptumRx — along with two smaller companies that also operate in South Texas, Prime Therapeutics and Navitus Health Solutions.

It also includes fraud, conspiracy, and racketeering charges against major drug manufacturers and wholesale distributors, as do many other complaints filed across the country. But Webb County’s case is unusual because of the legal claims and language directed at PBMs, entities the suit calls “the gatekeepers to the vast majority of opioid prescriptions filled in the United States.”

The role of the middlemen

Some legal experts said the behind-the-scenes role of PBMs might make it difficult to prove they are liable for the overdose deaths and other consequences of the crisis.

“They are far more removed than manufacturers and distributors,” said Jodi Avergun, a former chief of staff of the Drug Enforcement Administration and now a defense lawyer with Cadwalader, Wickersham & Taft. “PBMs play a less significant role and one that’s harder to ascribe liability to under traditional tort principles.”

But other experts said legal discovery could be particularly bruising for PBMs, especially since they possess records on the number of opioids dispensed in communities hit with huge increases in overdoses.

“It’s hard for these companies to [argue] that in certain locales the volume of pills was for a legitimate medical purpose,” said Rebecca Haffajee, a professor of health management and policy at the University of Michigan School of Public Health. “The paper trail of prescriptions makes it more compelling, and those records should be disclosable.”

Jennifer Luddy, a spokeswoman for Express Scripts, said the allegations in the case are without merit. “We plan to defend ourselves vigorously,” Luddy said in an emailed statement.

Many other PBMs also vowed to fight the charges. A spokesman for CVS Health, Michael DeAngelis, denied the allegations and said the company is “committed to the highest standards of ethics, including complying with all federal and state laws governing the dispensing of controlled substance prescriptions.”

DeAngelis said CVS has enhanced opioid safeguards by limiting certain patients to a seven-day supply, reducing dosages, and requiring the use of immediate-release formulations before dispensing extended-release drugs that carry a high potential for abuse.

A representative of Prime Therapeutics, based in Minnesota, said in a statement that the claims against the company “are categorically without merit” and also pointed to efforts to curb opioid prescriptions. The statement said the company has achieved a 16 percent reduction in total opioid claims among its 15 million commercial members in the last five years.

Navitus Health Solutions released a statement saying it has retained counsel to defend itself and that its inclusion in the lawsuit is baseless.

OptumRx did not respond to a request seeking comment.

Webb County’s complaint does not detail specific conduct by the PBMs in South Texas, a step Cicala said she will take in coming months. Instead, it discusses their control over the availability of prescription drugs in the region and references other investigations into how PBM business tactics have impacted the supply of opioids.

The suit cites a report by STAT that uncovered court documents in West Virginia showing how Purdue Pharma, the manufacturer of OxyContin, paid a PBM in 2001 in exchange for the PBM making opioids available with few hurdles.

Purdue made the payments to Merck Medco, which was later acquired by Express Scripts. In return, the PBM made opioids available at low copayments and without prior authorization. West Virginia officials, alarmed by a rise in overdoses, had been trying to implement prior authorization requirements to ensure opioids only went to people with a legitimate need. A former Purdue official told STAT that the payment strategy was employed with other big pharmacy benefit managers across the country.

The complaint alleges that the PBMs fraudulently hid their financial relationships with drug makers to prevent county officials from understanding their role in promoting the use of opioids.

“The PBM Defendants knowingly and intentionally chose to include opioids on their formularies that were more addictive to users because they generated greater profits,” the complaint states. “This failure led directly to the increased likelihood of addiction.”

The complaint also outlines severe pubic health consequences of opioid abuse in Webb County. The rate of drug-related fatalities doubled between 2007 and 2016 and the county has incurred increased costs to respond to overdoses and provide addiction treatment and education, according to the plaintiffs.

Avergun, the lawyer and former chief of staff at DEA, said that even if it’s hard to directly tie those consequences to PBMs, it’s a reasonable strategy to include them in the litigation.

She said Judge Dan Polster, who is presiding over the case in Ohio, has signaled a desire to bring together all the companies in the drug supply chain to change practices that have contributed to the crisis. Settlement discussions in the case are ongoing.

“PBMs control so much of which prescription drugs get paid for, so it’s appropriate for them to be at the table,” she said. “There is a thought that any pocket that has potentially profited from opioids being overprescribed should have some responsibility to pay for all the injunctive relief Judge Polster is trying to cause to happen.”