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US: Express Scripts to Pay $9.5 Million
To Settle Drug-Swapping Allegations


by ANDREW EDWARDSThe Wall Street Journal
May 27th, 2008

Pharmacy-benefits manager Express Scripts Inc. agreed Tuesday to pay $9.5 million to settle allegations that the company asked doctors to switch drugs primarily to get bigger rebates from pharmaceutical companies.

The move all but closes the books on a four-year investigation of practices at pharmacy benefit managers.

"Today's settlement completes our effort to clean up the PBM industry," said Vermont Attorney General William Sorrell in a statement. Vermont, which gets a $372,000 cut, was one of the lead negotiators with the company.

The settlement avoids a potential lawsuit with 29 states and the District of Columbia, which had been investigating the company's drug-switching practices.

The agreement states that Express Scripts "engaged in deceptive business practices by encouraging doctors to switch patients to different brand name prescription drugs and representing that the patients and/or health plans would save money," according to the Vermont attorney general's office.

The question was drug market share -- the higher the company's share of a certain drug, the higher the rebate it would get from pharmaceutical companies.

When they asked doctors, "it was often couched in vague language benefit saying the client would benefit or the plan," rather than the company specifically, said Vermont Assistant Attorney General Julie Brill.

Pharmacy-benefit managers Medco Health Solutions Inc. and CVS Caremark Corp. have already reached agreements with the states over similar issues.

"Now that all three of the nation's largest PBMs are under orders from our office and the court to reform their practices, we expect that the rest of the industry will take notice and follow the requirements we have established," Mr. Sorrell said.

The agreement prohibits Express Scripts from asking for a drug switch when a drug's cost is higher, when the patent on the original drug is expected to expire, or if the patient was switched from a similar drug in the past two years. Vermont said this amounts to a significant change in Express Scripts' business practices, a claim the company disputes.

"We're saying that our process essentially complies with the processes already," said Express Scripts spokesman Steve Littlejohn. He said that most of the changes were related to "notification and different forms of communication."

The investigation of Express Scripts began in 2004, with then-New York Attorney General Elliot Spitzer declaring that Express Scripts, which manages the state's pharmacy benefits, was "simply committing fraud."

Mr. Littlejohn said the New York lawsuit, which he described as a "contract dispute," was still pending. The New York attorney general's office didn't immediately return a call for comment.

Write to Andrew Edwards at andrew.edwards@dowjones.com





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