Drug Litigation Newsroom

$22.7 Million Settlement With Medco Health Solutions Resolving Allegations It Violated The Consumer Protection Laws

HARRISBURG Attorney General Jerry Pappert today announced that Pennsylvania and 19 other states have reached a $22.7 million settlement with the nation's largest pharmacy benefits manager (PBM), Medco Health Solutions Inc., to resolve allegations that the company switched patients to different prescription drugs but failed at times to pass the savings on to the patients or health plans.

Pappert said the national settlement resolved claims under the states' unfair trade practices laws. Pappert said the investigation into Medco's drug switching practices began more than a year ago and was spearheaded by Pennsylvania, Maine and Massachusetts. The states also worked closely with U.S. Attorney Patrick Meehan's office in Philadelphia.

"Consumers and their doctors should make the decision of switching from one medication to another based on the best interests of the patient, not because a PBM has found a way to make money," Pappert said. "This settlement ensures that Medco will give patients and doctors the information they need to make these important decisions."

Pappert said states alleged that the drug switches instituted by Medco generally benefited the company but did not always save patients or health plans money. In some cases, Pappert said, the switches did not save enough money to justify the changing of medications because the patients had to pay for follow-up doctor visits and tests. For example, Medco contacted doctors and had patients switched from certain cholesterol lowering medications to Zocor, but that switch often required consumers to receive follow-up blood tests.

Pappert said Medco also failed to disclose to prescribers that the switches would increase rebate payments from drug manufacturers to Medco. He said that Medco also failed to disclose to patients that the company, not doctors, initiated the drug switches and had financial incentives in doing so.

Pappert said the participating states are: Arizona, California, Connecticut, Delaware, Florida, Illinois, Iowa, Louisiana, Maine, Maryland, Massachusetts, Nevada, New York, North Carolina, Oregon, Pennsylvania, Texas, Vermont, Virginia and Washington.

The settlement prohibits Medco from soliciting drug switches when:

The net drug cost of the proposed drug exceeds the cost of the prescribed drug;

The prescribed drug has a generic equivalent and the proposed drug does not;

The switch is made to avoid competition from generic drugs; or

It is made more often than once in two years within a therapeutic class of drugs for any patient.

The settlement requires Medco to:

Disclose to prescribers and patients the minimum or actual cost savings for health plans and the difference in co-payments made by patients;

Disclose to prescribers and patients Medco's financial incentives for certain drug switches;

Disclose to prescribers material differences in side effects between prescribed drugs and proposed drugs;

Reimburse patients for out-of-pocket costs for drug switch-related health care costs and notify patients and prescribers that such reimbursement is available;

Obtain express, verifiable authorization from the prescriber for all drug switches;

Inform patients that they may decline the drug switch and receive the initially prescribed drug;

Monitor the effects of drug switches on the health of patients; and

Adopt a certain code of ethics and professional standards.

In addition, Medco will pay $20.2 million to the states and $2.5 million to patients who incurred expenses related to a certain switch between cholesterol controlling drugs. Pennsylvania's share of the settlement will be $1.8 million. Medco also has agreed to pay the states $6.6 million for fees and costs of litigation.

Pappert said that Pennsylvania has elected to receive $1.8 million in prescription drug cards in lieu of their monetary payment. Pappert said the state's PACE program will give the drug cards to approximately 7,200 seniors to cover their generic drugs for one year.

"I have made it a priority to find ways to lower the cost of prescription drugs for Pennsylvanians," Pappert said. "This case will send a message to all PBMs that we won't allow them to make money at the expense of our citizens."

Medco is the nation's largest PBM, with more than 62 million patients. PBMs contract with health plans to process prescription drug payments to pharmacies for drugs provided to patients enrolled in the health plan.

The settlement was negotiated by James A. Donahue III, Chief Deputy Attorney General of Pappert's Antitrust Section.