Article: Ohio Jury Finds Medco Defrauded Retired Teachers

Source: National Community Pharmacists Association

Wednesday December 21, 5:21 pm ET

"A court of law has clearly stated that PBMs cannot place their own corporate interests above those of the plan's beneficiaries."

NCPA Applauds Verdict

ALEXANDRIA, Va., Dec. 21 /PRNewswire/ -- The National Community Pharmacists Association (NCPA) today applauded the verdict of an Ohio jury, when it decided that the giant pharmacy benefit manager (PBM) Medco Health Solutions Inc. should pay $7.8 million to the State Teachers Retirement System of Ohio (STRS Ohio) for breaching its fiduciary duty and for fraud.

The STRS Ohio board sued Medco in 2003 in the Court of Common Pleas in Hamilton County, Ohio, alleging that the company overcharged the retirement plan on generic drugs and inappropriately kept manufacturer rebates for itself instead of passing them on to the plan. According to the Attorney General of Ohio, this is the first time that a U.S. jury has recognized that a company managing pharmacy benefits has a legal duty to act in the best interest of retirees and pensioners.

"This should be a huge wake-up call to the giant PBMs," said NCPA Executive Vice President and CEO Bruce Roberts, RPh. "A court of law has clearly stated that PBMs cannot place their own corporate interests above those of the plan's beneficiaries. PBM self-dealing has been exposed for what it is: a true threat to our country's health care system."

The jury did not reach a verdict on punitive damages. This issue will be considered in a future trial.

Despite Medco's claims that it would act to obtain the lowest possible drug prices for Ohio's retired school teachers, Medco allegedly engaged in a series of activities that produced the opposite results. These allegations included:

     * Withholding secret drug manufacturer rebates

    * Charging hidden fees and accepting and retaining secret profits

    * Switching patients to a Medco mail-order pharmacy claiming this would
      lower drug costs, and then charging more for generic drugs than they
      would cost at retail pharmacies

    * Accepting payments from drug manufacturers to promote more expensive
      brand name drugs over less expensive generic equivalents

    * Manipulating the committee (through secret payments) that determined
      what drugs were listed on the formulary -- the listing of drugs
      available to patients

    * Acting as a commissioned sales agent for Merck & Co.

In April 2004, Medco settled a case brought by 20 state attorneys general concerning allegations of fraud. A lawsuit by the U.S. Attorney is ongoing, as well as lawsuits and investigations in a number of states into the business practices of Medco and other PBMs. This sends a clear message that PBM operations need some form of government oversight to stem this pattern of activity.

"This pattern of abusive practices that Medco and the other two giant PBMs engage in is a blight on health care and is not in the best interest of patients or their employers. It must be stopped," said Roberts. "We commend the Attorney General of Ohio, Jim Petro, for exposing the massive fraud that Medco has been perpetuating across the health care delivery system. This verdict is another important step in shining a much needed light on the deceptive practices of the giant PBMs."

The National Community Pharmacists Association, founded in 1898, represents the nation's community pharmacists, including the owners of more than 24,000 pharmacies. The nation's independent pharmacies, independent pharmacy franchises, and independent chains represent an $84 billion marketplace, dispensing nearly half of the nation's retail prescription medicines.