Pennsylvania Attorney General Corbett Announces Multi-State Settlement With Caremark

HARRISBURG, Pa., February 14, 2008 /PRNewswire-USNewswire/ -- One of the nation's largest pharmacy benefits management companies (PBMs) has reached a settlement with Attorneys General from 29 states resolving claims of deceptive business practices.

Attorney General Tom Corbett said that the agreement was reached with Caremark Rx, L.L.C. and two of its subsidiaries: Caremark, L.L.C. and CaremarkPCS, L.L.C., formerly Advance PCS.

As part of the settlement, Caremark is required to significantly change its business practices and pay $38.5 million to the states and up to $2.5 million in reimbursement to patients who incurred expenses related to certain switches between cholesterol-controlling drugs.

Corbett said that $22 million of the amount paid to the states must be used to benefit low-income, disabled or elderly consumers of prescription medications, to promote lower drug costs for state residents, to educate consumers concerning the cost differences among medications, or for similar purposes. Pennsylvania will receive $1.2 million for this purpose.

Caremark will also pay $16.5 million to the states in costs.

In the complaint, the states allege that Caremark engaged in deceptive business practices by encouraging doctors to switch patients to different brand name prescription drugs. Caremark also allegedly represented that the patients and/or health plans would save money. Doctors were not adequately informed of the effect this type of switch would have on patients' costs.

Corbett said that Caremark did not clearly disclose to their clients' plans that rebates accrued from the drug switching process would be retained by Caremark and not passed directly to the client plan.

"Caremark was operating against their clients' interests by retaining rebates and discounts that they were obligated to pass onto their clients," Corbett said. "This agreement stops the deceptive business practices and takes the necessary steps to protect health plans and patients."

Corbett said that the settlement generally prohibits Caremark from soliciting drug switches when:

-- The net drug cost of the proposed drug exceeds the net drug cost of the originally prescribed drug;

-- The cost to the patient will be greater than the cost of the originally prescribed drug;

-- The originally prescribed drug has a generic equivalent and the proposed drug does not;

-- The originally prescribed drug's patent is expected to expire within six months; or

-- The patient was switched from a similar drug within the last two years.

The settlement requires Caremark to:

-- Inform patients and prescribers what effect a drug switch will have on a patient's co-payment;

-- Inform prescribers of Caremark's financial incentives for certain drug switches;

-- Inform prescribers of material differences in side effects or efficacy between prescribed drugs and proposed drugs;

-- Reimburse patients for out-of-pocket expenses for drug switch related health care costs and notify patients and prescribers that such reimbursement is available;

-- Obtain express, verifiable authorization from the prescriber for all drug switches;

-- Inform patients that they may decline a drug switch and the conditions for receiving the originally prescribed drug;

-- Monitor the effects of drug switches on the health of patients;

-- Adopt a certain code of ethics and professional standards;

-- Refrain from making any claims of savings for a drug switch to patients or prescribers unless Caremark can substantiate the claim; and

-- Inform prescribers that visits by Caremark's clinical consultants and promotional materials sent to prescribers are funded by pharmaceutical manufacturers, if that is the case.

Corbett noted that PBMs enter into contracts with employers and government health plans to process prescription drug claims for drugs provided to patients enrolled in the health plan.

PBMs also negotiate with drug companies to obtain volume discounts; negotiate discounts with participating retail pharmacies to provide dispensing services at a discount and dispense drugs to patients through PBM-owned mail order pharmacies.

In the 30-years since the first PBMs appeared, their services have evolved to include complex rebate programs, pharmacy networks and drug utilization reviews.

The Attorneys General from Arizona, Arkansas, California, Connecticut, Delaware, District of Columbia, Florida, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nevada, New Mexico, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Vermont, Virginia and Washington participated in the settlement.

The agreement was negotiated by Chief Deputy Attorney General James A. Donahue, III of the Attorney General's Antitrust Section.

CONTACT: Attorney General's Press Office, +1-717-787-5211

Web site: http://www.attorneygeneral.gov/

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Posted: February 2008


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