Ojai’s Medical Arts Pharmacy triumphed March 15 over pharmacy benefit giant
OptumRx, winning a favorable ruling from a California appellate court.
One of Ojai’s last independent pharmacies, Medical Arts Pharmacy, led a group of independent pharmacies from across the state in suing OptumRx in 2020, alleging, in part, that “OptumRx abuses its price-setting power to drive independent pharmacies out of business and ... diverts business to its own mail-order pharmacy.”
OptumRx argued the matter must be arbitrated, as required by its provider manual. The small pharmacies objected, understanding that forced arbitration often gives corporations an upper hand.
The trial court found OptumRx’s arbitration requirement unconscionable and unenforceable and OptumRx appealed that decision. But on Wednesday, a three-judge panel in San Francisco sided with the small pharmacists, who argued arbitration would cost between $50,000 and $100,000. That, the court ruled, doesn’t meet a minimum standard of fairness.
“The pharmacies submitted affidavits that most of them made no more than $64,000 each month, whereas OptumRx’s revenue in 2019 was more than $74 billion,” the court pointed out.
Medical Arts Pharmacy owner Chris Platt said he is pleased with the decision.
“This ruling lets us get our legal representation in court whereas before we couldn’t,” he said.
Ojai recently lost beloved pharmacy Ojai Rexall Drugs, which had been in business for many decades. When it closed in December, Ojai Rexall transferred its customers to Medical Arts Pharmacy, one of four remaining pharmacies in the Ojai Valley. The others are The Medicine Shoppe Pharmacy, Ojai Village Pharmacy, and Rite Aid. The Rite Aid Corporation is publicly traded and operates its own growing pharmacy benefit management (PBM) company, Elixir.
Platt said he has been frustrated to see PBMs increasingly push customers into mail-order prescription services that undermine the business of independent pharmacies. If independents are driven out of business, customers will be left with fewer choices, but Platt has pushed back.
“Obviously, I never would have succeeded if I didn’t have the facts on my side,” he said. “It’s a super big win against PBMs.”
PBMs serve as middlemen in drug price negotiations between manufacturers and health insurers. PBMs also operate chain pharmacies. They pay pharmacies for drugs on behalf of health plans and employers, at negotiated rates plus dispensing fees. Pharmacies purchase drugs from manufacturers or wholesalers.
CVS Health is the largest PBM in the nation, followed by Express Scripts and OptumRx. Lobbying in the industry tends to pit PBMs and health insurers against drug manufacturers. But health insurers increasingly own their own PBMs.
OptumRx, for example, is owned by UnitedHealth Group. CVS and Aetna are one company, as are Express Scripts and Cigna. These mergers may impact patients as insurers seek higher PBM revenues, driving them to direct patients toward drug treatments that generate larger rebates for them.
Independent pharmacists nationwide have called for help competing with PBMs, which often are owned by or own the pharmacies they steer patients to use.
The National Community Pharmacists Association blames PBMs for rising drug prices.
“PBMs not only set reimbursements for their competitors (i.e., local independent pharmacies), they also decide which pharmacy the patient can use,” the association states in its online material.
