Landmark lawsuit would claw back the PBM clawbacks | NCPA Executive Update | September 29, 2023

NCPA September 28, 2023

Dear Colleague,

Doug Hoey General Douglas MacArthur once said that the best kind of luck is the luck you make for yourself. I am thrilled to share the news of a class action lawsuit filed by NCPA member Matt Osterhaus this week against vertically consolidated CVS Health, Caremark, and Aetna that will—if successful—recoup millions of dollars in pharmacy DIR fees for community pharmacies. Besides the monetary value of this gambit, here's why it matters: the suit turns the tables on PBMs, which have been gaming the system for far too long.

The details are pretty straightforward. The lawsuit was announced on Wednesday by the law firms Berger Montague PC and Cohen and Gresser LLP, who are leading the charge, and it claims that Caremark—the largest pharmacy benefit manager in the country and a subsidiary of Fortune 6 corporation CVS Health—has been assessing pharmacy DIR fees in violation of federal antitrust laws and state laws governing contracts. The lawsuit also challenges CVS' agreements to arbitrate claims as being unfair and unenforceable.

How did we get here—and how does a lawsuit like this have a basis to move forward? A few things happened recently that created a foundation for our David to attack their Goliath. In 2021, an arbitrator awarded a judgment of $23 million to the AIDS Healthcare Foundation, finding that Caremark breached the covenant of good faith and fairness in implementing its DIR practices. A district court in Arizona confirmed the award in 2022. Also, in 2022, an arbitrator awarded a judgment of $2.1 million in wrongfully collected fees, plus an additional $1.5 million in attorneys and interest, because CVS' contract was unconscionable. A district court confirmed the award in 2023.

That sounds well and good, but here's the deal with arbitration processes: they keep the details of these cases secret. That effectively allowed CVS and the other PBMs to continue to treat pharmacies unfairly and illegally extract reimbursement. True to form, and despite these two awards, CVS did nothing to change its ways, other than to modify its dispute resolution processes to make it more expensive and more difficult for pharmacies to bring claims against them.

NCPA spent the better part of the year educating law firms on what these decisions could mean for the industry moving forward. I am hoping this class action lawsuit helps to bring these unlawful practices into public view. I am also hopeful that NCPA can reach as many members as possible to educate them on the significance of these actions—as a turning point in our years-long battle with PBMs, but also as a rallying cry for up-and-coming pharmacists who are entering a marketplace that needs to change for pharmacies to thrive.

Besides our digital communications, we've created another important touchpoint for members at the 2023 NCPA Annual Convention in Orlando. Lawyers from Berger Montague, Cohen & Gresser, and other firms involved will brief NCPA members there during the event's run from Oct. 14 through Oct. 17.

We've been fighting the PBMs on Capitol Hill and the state legislatures, in the agencies, and in the courts for decades—and we've made a lot of progress on all those fronts. But this is a critical opportunity for our members to fight for themselves and potentially get back just some of the billions of dollars in fees wrongfully taken by the PBMs. If you're coming to Orlando, make this a priority.


Doug Hoey

B. Douglas Hoey, Pharmacist, MBA

PS: The talk in Washington about the government shutdown reached a fever pitch this week. If, by the time you read this, things are looking dire, I want to just remind you—in case your patients are wondering—that the Social Security Administration will continue to issue retirement and disability benefits, and payments would continue under the Medicare and Medicaid health programs. Reuters has a great FAQ if you want to learn more.