Federal prosecutors in Manhattan have asked drugmakers including Johnson & Johnson, Merck and Endo for information regarding contracts with pharmacy benefit managers in connection with a False Claims Act (FCA) investigation. In its quarterly report filed with the U.S. Securities and Exchange Commission (SEC), J&J disclosed that its Janssen Pharmaceuticals unit received a civil investigative demand from the U.S. Attorney’s office for the Southern District of New York asking for information about Janssen’s contractual relationships with pharmacy benefit managers (PBMs) for unspecified products from January 2006 to the present. The demand was issued in connection with an investigation under the False Claims Act.
Merck & Co. Inc. disclosed a similar request by federal prosecutors, who wanted to know more about Merck’s PBM contracts, services and payments in connection with its Maxalt and Levitra drugs. Endo Pharmaceuticals Inc. said last month that prosecutors requested information regarding PBM contracts for its Frova treatment for migraines.
None of the three companies revealed in their respective SEC filings which pharmacy benefit managers they contracted with. Pharmacy benefit managers such as Express Scripts Inc. and CVS Health act as a third-party administrator of prescription drug programs for health plans, processing drug benefits, negotiating prices with drugmakers and operating mail-order pharmacies.
In October, Novartis Pharmaceuticals Corp. agreed to pay $390 million to resolve the federal government’s FCA allegations that it provided improper discounts and rebates to specialty pharmacies. The following month, the company made detailed admissions about its sales strategies with specialty pharmacies and agreed to sweeping federal oversight of its relationships with the controversial dispensers.
Novartis admitted to using various methods to create incentives for specialty pharmacies to increase sales of iron-reducing drug Exjade and immunosuppressant Myfortic. Specifically, Novartis admitted that it threatened to cut ties with at least one pharmacy that wasn’t dispensing enough of its medicines. The drugmaker also acknowledged that it steered patients and bonus payments to specialty pharmacies based on their ability to generate refills, many of which were paid for by Medicare and Medicaid.
I have found that few people in the business world really understand how the pharmacy benefit managers operate. There is ample opportunity for the PBMs to use the current system for their financial benefit with little supervision over their activities. Kickbacks from drug companies to PBMs appear to be quite prevalent. If you are not familiar with PBMs, you should check out the legislature history and learn how they have become so powerful.
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