Last month's unsealing of two whistleblower lawsuits against pharmaceutical benefit manager Medco Health Solutions has brought even more scrutiny to a little known sector of the prescription drug industry that affects millions of patients and is already the target of state and federal investigations.
On June 23, Patrick Meehan, the U.S. attorney in Philadelphia, joined two civil suits filed under state and federal False Claims Acts alleging Medco switched patients to more expensive Merck drugs, destroyed prescriptions and paid kickbacks to doctors, thereby defrauding the Federal Employees Health Benefits Program, Tricare and other government insurers out of hundreds of millions of dollars.
As rising prescription drug costs have pushed healthcare insurance premiums higher, self-insured em-ployers and health insurers have turned to pharmacy benefit management companies to try to control costs, primarily by acting as gatekeepers who establish drug formularies. Pharmacy benefit managers offer disease-management programs, substitute generic for brand-name drugs and restrict access to expensive drugs. They also cut costs by shipping maintenance drugs in larger quantities via mail order processing plants.
The two lawsuits against Merck-Medco Managed Care, now known as Medco Health Solutions, and its parent company, pharmaceutical manufacturer Merck & Co., were filed in U.S. District Court in Philadelphia in 1999 by George Hunt and Walter Gauger, former pharmacists employed by Merck-Medco's mail-order facility in Las Vegas, and in 2000 by New Jersey physician Joseph Piacentile.
The whistleblowers allege Merck-Medco also shorted patients on the number of pills shipped from mail-order facilities, even while billing for the full number prescribed; destroyed prescriptions it could not process in time to avoid costly contractual penalties; and employed pharmaceutical technicians instead of pharmacists or physicians to perform utilization reviews of drug interactions.
The whistleblowers allege that the company, once the country's largest pharmacy benefit manager with 65 million enrollees, defrauded federal programs by hundreds of millions of dollars but did not specify damages in the suit. The potential damages could be sizable, considering Merck-Medco reported $26 billion in revenue in 2001 and filled 537 million prescriptions.
Medco Health Solutions spokeswoman Ann Smith said the company denies the whistleblower charges, which she contended "are absolutely untrue-or reflect years-old isolated issues that were identified and corrected and in no way and at no time compromised the quality of patient care."
While federal authorities have warned pharmacy benefit companies about their business practices for several years, this is the first public suit revealing the government's allegation. Also last month, St. Louis- based Express Scripts acknowledged receiving a subpoena from New York Attorney General Eliot Spitzer seeking information about the company's compliance with state and federal antitrust and consumer-protection laws.
Both Medco Health Solutions and Express Scripts have been targets of lawsuits by consumer groups alleging they inflated drug prices.
However, the pharmacy benefit manager relationships with pharmaceutical manufacturers have drawn federal interest. In some cases, as in Merck-Medco's, the drug companies own the pharmacy benefit managers themselves.
"I think that the PBM industry has been virtually unknown to most Americans," said Philadelphia whistleblower attorney Marc Raspanti of the firm Miller, Alfano & Raspanti, who represents the two pharmacists. "People are rapidly being herded into PBMs without knowing what they do or how they work. Everyone understands the corner pharmacy, but they don't understand the corner pharmacy ex-panded 100 millionfold."
U.S. Attorney Meehan said the conduct alleged in the complaints threatens the well-being of patients. "Getting the proper medication in the hands of patients as quickly and efficiently as possible should be the mission of any pharmacy benefit manager," he said. "However, these allegations suggest that, somewhere along the line, the focus became the profit instead of the patient."