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Express Scripts conspired to overcharge pharmacies, class action says

A group of pharmacies has filed a proposed class action lawsuit accusing Cigna Group's (CI.N) pharmacy benefit manager unit Express Scripts Inc of conspiring with another company to charge higher fees and reimburse pharmacies at lower rates.

In a complaint filed Thursday in federal court in Milwaukee, Wisconsin, four retail pharmacies said that a three-year collaboration agreement announced in 2019 between Express Scripts and Prime Therapeutics was in fact a pretext for fixing reimbursement rates and fees, with no benefit for customers.

"We are committed to reimbursing network pharmacies fairly and will vigorously defend ourselves against the baseless allegations in this complaint," Express Scripts said in a statement.

Prime Therapeutics, which is not named as a defendant in the case, did not immediately respond to a request for comment.

Express Scripts had the second largest market share of U.S. pharmacy benefit managers (PBMs) in 2022, while Prime Therapeutics had the fifth largest, according to a March report from Drug Channels Institute, a drug industry research organization.

PBMs act as intermediaries between drugmakers, health insurance plans and pharmacies to negotiate drug prices and maintain the lists of drugs covered by insurance, known as formularies.

The pharmacies - two in Wisconsin, one in Minnesota and one in New Jersey - said in their complaint that, until the 2019 agreement, Express Script's larger market share allowed it to collect higher transaction fees from retail pharmacies than Prime Therapeutics, while reimbursing them less. Under the agreement, the complaint said, Prime began paying the same reimbursement rate and charging the same fees as Express Scripts.

When Express Scripts announced the collaboration, it said that it would be providing some services to Prime in order to better serve customers, but the pharmacies alleged in Thursday's lawsuit that the two companies continue to deal separately with pharmacies in every material way except for setting reimbursements and fees.

"The agreement does not, and is not intended to, achieve any efficiencies or economies of scale or procompetitive effects in the relevant markets, and the assertion of any such efficiencies or procompetitive effects by either Prime or ESI is pretextual," the lawsuit said. "The agreement is simply a naked restraint on price competition with regard to reimbursement rates and transaction fees."

The plaintiffs, which seek to represent a nationwide class of retail pharmacies, said the agreement violates the Sherman Act, a federal antitrust law.

The lawsuit comes amid growing scrutiny of PBMs' business practices.

The state of Hawaii sued Express Scripts and other leading PBMs earlier this month. Ohio brought a similar case in March. Express Scripts has denied the allegations in previous lawsuits.

CVS Health's PBM, Caremark, is also facing a class action by pharmacies in Washington federal court.


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