Michigan sues PBMs, alleging unlawful collusion created ‘pharmacy deserts'
A lawsuit filed by the state of Michigan claims that half of Detroit’s neighborhoods are “pharmacy deserts,” along with more than 40 small towns, where most residents live at least 10 miles from the nearest location to fill a prescription.
The lawsuit, filed by state Attorney General Dana Nessel against defendants Express Scripts and Prime Therapeutics, claims the former controls more than 89% of the pharmacy benefit manager (PBM) market in Michigan and has since 2021. The complaint contends the dominance represents “likely the largest market share ever achieved by a single PBM within a single U.S. state.”
According to Nessel, in some cities Express Scripts controls 96% of the market, as the main distributor to almost all pharmacies. Prime, a much smaller PBM, should ideally be competing for its share by offering better prices. However, Nessel said the two companies instead “conspired to eliminate competition among themselves for pharmacy business in order to extract illegal profits from the marketplace.”
She accuses the two PBMs—as the intermediaries between drug manufacturers and pharmacies—of engaging in an “unlawful agreement” to suppress reimbursement rates to independent pharmacies, effectively allowing the companies to earn “excessive profits” while shutting down smaller retailers in the state, all in an effort to control the distribution of drugs.
“Michigan residents should not have to drive 45 minutes, or sometimes even farther, to pick up the insulin, heart medication, or antibiotics they need,” Nessel said in a statement announcing the filing. “Yet the unlawful, anticompetitive agreement that the lawsuit alleges has handed these PBMs unprecedented control over which pharmacies receive medication, how quickly residents get their prescriptions, and how much they’re forced to pay—crippling small, independent pharmacies and restricting access to lifesaving medications in the process.”
“With this lawsuit, we are putting an end to these harmful practices to ensure Michiganders have reliable, affordable access to the medications they depend on,” she added.
According to Nessel, the collusion between Prime and Express Scripts began in 2019, when the Prime adopted the lower reimbursement rates of its supposed competitor, in exchange for access to Express Scripts’ pharmacy network. According to the court filing, Prime paid administrative fees in exchange for access to more pharmacy locations, effectively partnering with Express Scripts.
As a result, any pharmacy not part of the network struggled to be competitive, as they received less money for filling prescriptions. Nessel alleges that, in some cases, the cost to dispense drugs outweighed what insurance companies were willing to pay as a result of the de facto price controls.
To back its claim, Michigan points to a report from the Federal Trade Commission that found that pharmacies that are affiliated with Express Scripts mark up specialty drugs by thousands of percentage points to artificially inflate prices of certain therapies.
The FTC lawsuit against the three largest PBMs—including Express Scripts—is currently on ice, the central issue in that case being collusion over the price of insulin.
Michigan filed its lawsuit on April 29. It’s unclear when or if it will move forward.
HealthExec reached out to both PBMs for comment. Express Scripts did not reply; however, Prime sent the following statement:
"Prime Therapeutics is owned by not-for-profit Blue Cross and Blue Shield Plans, with a focus on making medications more affordable for our clients and the patients we serve. As a pharmacy solutions company, Prime plays a unique role in the drug supply chain by working with pharmacies and pharmaceutical companies to help manage drug costs for patients.
A network lease for a portion of our pharmacy relationships is one way in which we help manage costs for our clients and patients, in compliance with all applicable laws. Since the lease agreement was publicly announced in 2019, Prime’s data has shown that the agreement provides significant savings to plans and to patients at the point-of-sale—savings that make drugs more affordable, improving medication adherence and health outcomes.
Pharmacy access is also a critical issue for Prime and its health plan clients to enable patients access to medications necessary for their health. We seek to compensate pharmacies fairly for the supplies, medications, and clinical services they provide, balancing access and affordability to best meet the needs of our health plans and patients."
Chad is an award-winning writer and editor with over 15 years of experience working in media. He has a decade-long professional background in healthcare, working as a writer and in public relations.