Pharmacies' Lawsuit Against PBMs Won on Appeal

Issue of the Case

For over 20 years, a western statehas had a statute requiring that pharmacybenefit managers (PBMs) conductor obtain the results of pharmacyleveldispensing fee surveys at leastevery 2 years and forward those findingsto the plan sponsors for whom theyprovide plan administration services.The issue presented in this case waswhether pharmacy owners have legalstanding to challenge the failure of PBMsto conduct such obligatory surveys.

Facts of the Case

A group of pharmacy owners in thestate sued a collection of PBMs in federalcourt seeking to enforce the provisionin state law mandating such surveys.The lawsuit was filed in federalcourt because of diversity of citizenship;ie, some of the defendant PBMfirms were "citizens" of another state.The federal trial court dismissed thecase based on an argument made bythe defendant PBMs that the pharmacyowners lacked "standing." Standingmeans that some concrete legal interestof the plaintiff pharmacy ownersmust have been invaded by the actionor inaction of the defendants.

The statute, enacted in the early1980s, required that the PBMs conductthe surveys or contract with an outsidefirm to do so, focusing on the dispensingfees charged to uninsured patients.The results of these surveys were thento be relayed by the PBMs to their clientson whose behalf they administerthe prescription-drug insurance plans.

The wording of the statute in questionis "every prescription drug claimsprocessor shall have conducted orobtained the results of a study or studieswhich identify the fees, separatefrom ingredient costs, of all, or a statisticallysignificant sample, of [state]pharmacies for pharmaceutical dispensingservices to private consumers."Further, it mandated that"this study or these studies shall beconducted or obtained no less oftenthan every 24 months."

A separate section in the statuteconferred on pharmacy owners theright to sue to enforce the requirementsof the statute:

Any owner of a licensed pharmacyshall have standing to bring anaction seeking a civil remedy pursuantto this section so long as hisor her pharmacy has a contractualrelationship with, or renders pharmaceuticalservices to, a beneficiaryof the client of the prescription drugclaims processor, against whom theaction is brought.

The pharmacy owners took the positionthat the intent of the legislaturewas that, by providing accurate informationderived from the surveys aboutpricing of pharmacy services to the firmsthat sponsored the prescription-druginsurance programs, the plan sponsorscould make informed decisions aboutfair reimbursement rates to be paid forserving beneficiaries of the prescription-drug plan. This was in contrast tothe reimbursement rates the PBMswere "imposing on pharmacies."

The argument of the PBMs in responsewas that using the informationas the pharmacy owners contemplated,ie, to lead to possible adjustment ofreimbursement rates, was too remoteor distant a possibility to create standingon the part of the pharmacies. ThePBMs argued that, even if the plansponsors received the results of thesurveys, the sponsors were not requiredto use them to adjust reimbursementrates. Indeed, the PBMs arguedthat, in their view, the plan sponsorswere not even required to read thereports.

The Court's Ruling

The court appellate ruled that therewas sufficient possibility of injury tothe legal interests of the pharmacyowners from the PBMs not conductingthe mandated surveys and relayingthose results to plan sponsors that thesuit should not have been dismissed atthe trial court level. The trial courtjudge erred when she ruled that thepharmacy owners lacked legal standing.The case was returned to the trialcourt of origin for further proceedings.

The Court's Reasoning

The decision on appeal was that thepharmacies had alleged a sufficient proceduralinjury—failure of the PBMs tofollow the statutory mandates—for atrial to take place.

The appellate court concluded thatthe pharmacy owners had successfullydemonstrated that the steps mandatedby the statute were designed to protectsome threatened concrete interest oftheirs. Specifically, the court concludedthat the legally protected interest ofthe pharmacy owners was that therequirement that PBMs conduct thesurveys and forward the results to plansponsors would lead to more informeddecision making by the plan sponsorsabout reimbursement rates for servicesprovided to their beneficiaries.

Dr. Fink is professor of pharmacy law and policy atthe University of Kentucky College of Pharmacy, Lexington.