Pharmaceutical Practices Under Scrutiny in Court

It's not surprising that the multi-billion dollar pharmaceutical industry attracts a great deal of government scrutiny. As prescription drug prices and uninsured rates continue to climb, states and the federal government are constantly watching the activities of major players in the industry, seeking to root out wrongdoing and wastefulness that raise consumer prices.

To achieve that, Maine took a hard look at the practices of pharmacy benefit managers (PBMs)--the powerful middlemen between drugmakers and large purchasers, such as insurers, Medicaid and health plans. PBMs pool the purchasing power of these entities to negotiate volume discounts and rebates with manufacturers, a practice that--at least in theory--lowers purchasers' costs.

Despite this litigation activity, state attempts to regulate the practices and policies of PBMs have largely been unsuccessful. Fourteen states considered legislation in 2004 to require greater transparency in the activities of PBMs, but all of them except those in Washington, D.C., and Maine were either quashed in the legislature or struck down in court.

This is likely due to concerns that regulating PBMs will harm competition and ultimately lead to higher prices for consumers. Others argue the regulations are illegal.

"If Maine shows that it's realizing cost savings, that might spur a federal initiative," Armon says. "In the meantime, PBMs will be very cognizant of their activities, and their government affairs folks are going to be lobbying state governments."

staff Writer

Bio and more articles

Join the Conversation

Advertisement. Closing in 15 seconds.