Axios’ Bob Herman is back this morning with another example of how pharmacy benefit managers — the companies that negotiate discounts between employers and pharmaceutical companies — maximize their financial benefits. In this case, a court said those steps went too far.
Driving the news: Last year, New Jersey awarded pharmacy benefit manager OptumRx a $6.7 billion contract to oversee prescription drug benefits for the state's 835,000 public employees, retirees and dependents.
- But now New Jersey has to redo the process after a court said OptumRx "improperly hedged" its contract.
- The New Jersey court faulted OptumRx for inserting a clause that would have guaranteed the PBM's financial stability if the state tinkered with drug benefits — for example, if it altered how specialty medications are covered.
- The judge said the language gave OptumRx, which is part of UnitedHealth Group, "a clear competitive advantage."
This is not a one-off. Remember that Express Scripts contract template Bob obtained a while ago? Different company, but it preserved some of the same flexibility for the PBM.
That template allowed the company to change the terms of its agreements “solely as necessary to return (Express Scripts) to its contracted economic position" under several circumstances, includng:
- "A material change in: (i) the conditions or assumptions stated in this agreement; or (ii) the size, demographics or gender distribution of sponsor's membership compared to data provided by sponsor."
- "Sponsor changes its formulary, benefit designs...or otherwise takes an action that has the effect of lowering the amount of rebates earned."
Go deeper: Read the whole story here.