MANAGED DRUG PLANS MAY FACE CHANGESPosted On: Jan. 21, 1996 12:00 AM CST
CHICAGO-A tentative settlement between 13 large drug manufacturers and thousands of independent pharmacies last week probably does not signal an immediate prescription for change among employers that use managed care pharmacy programs, but such changes could be ahead.
Subject to court approval, the drug companies would pay about 40,000 independent retail drug stores $600 million, the Wall Street Journal reported last week. Eight other drug makers that reportedly rejected the settlement are to go on trial in U.S. District Court in Chicago in April.
The druggists, in a class-action suit, accuse the drug makers of collusion in providing hefty discounts to health maintenance organizations and mail-order drug companies. The companies claim volume discounting is legal.
The long-term future of managed pharmacy discounts depends to a great extent on whether a jury finds the remaining defendants violated antitrust laws, and, if so, whether the judge orders changes in drug pricing.
The monetary settlement does not affect any later injunctive relief, so future pricing restrictions could affect all 21 retail drug makers and about a dozen wholesalers that are defendants, said John Rector, general counsel of the Washington-based National Assn. of Retail Pharmacists.
The amount of money involved here could prompt regulators to more closely scrutinize drug pricing, regardless of the trial outcome, said Mr. Rector. "The surfacing of offers like $600 million will put pressure on federal and state antitrust agencies to do something."
Those companies that are settling are likely realizing that jury bias against big corporations and institutions could work against them, as would jurors' interest in low-cost health care, said Anne Pramaggiore, an antitrust lawyer and partner in Chicago-based McDermott, Will & Emery. Also, treble damages can be imposed in an antitrust case.
Even if discounting ends, employers would still have reasons to contract with pharmacy benefit managers, said Todd Swim, health actuary and capitation practice leader for Buck Consultants in Chicago.
"There are other inducements beyond pure discounts," Mr. Swim said. "If no one receives discounts from managers, there would still be significant value they (PBMs) would add to the product."
For example, effective use of formularies and databases that track drug interactions, as well as plan designs for drug programs that are tailor-made for specific employers, would still be attractive to employers, he said.
The proposed settlement is likely to lead to fewer and smaller discounting arrangements, he said.
The effect of the suit could be either to boost discount drug prices to retail levels or push retail prices down to current discount levels. More likely, an equilibrium will be reached, said Mark Pilkington, executive director of the Illinois Pharmacists Assn. in Chicago.
Mr. Pilkington added that he thought such an equilibrium would come about by the drug companies' changing their pricing philosophy-not a court order. He said, he believed the remaining defendants would agree on a settlement, as well, to avoid going through a trial and being forced to release years of confidential pricing data.