Far too many pharmacy benefit managers (PBMs) thrive on opacity in their business operations, but sometimes public litigation shines the light of day on secretive practices. For example, a New York court recently refused to release Express Scripts, Inc. (ESI), one of the most prominent PBMs in the nation, from a pending litigation. The lawsuit, filed by the New York City Transit Authority (NYCTA), claimed that ESI breached numerous contractual provisions by failing to identify fraudulent prescription claims paid by the health plan. (See generally New York City Transit Authority v. Express Scripts, Inc., case no. 1:19-cv-05196 (S.D.N.Y. 2022). Benefits advisors and employers/plan sponsors can learn from the suit.
According to the lawsuit, NYCTA hired ESI to administer and manage the prescription drug benefits NYCTA offered to its employees, retirees, and dependents. In the year prior to contracting with ESI, NYCTA paid $6 million for compounded prescription claims. To the shock and awe of the NYCTA, in the first year of its contract with ESI, NYCTA paid over $38 million for compounds. In fact, in June 2016, only two months after the contract term began, an individual’s claim for an erectile dysfunction compound medication totaled $405,325.43 over three months. Critically, a significant portion of the compound claims contributing to the substantial increase in spending originated from just three providers and were largely fraudulent. Disturbingly, ESI conducted its own investigations into two of the providers and neglected to share the results with NYCTA. ESI likely approved overpriced compounds because ESI may have earned “spread pricing” on such claims—this litigation will reveal the truth. Plans should carefully monitor PBM spread pricing. Similarly, after discovering the third provider had pleaded guilty to federal fraud charges arising out a workers’ compensation kickback scheme, ESI is alleged to have withheld the information from NYCTA.