PRESS RELEASE FOR IMMEDIATE RELEASE

Contact: Judy Hodas, Deputy Attorney General

Consumer Protection Unit

Phone: (302) 577-8827

Date: April 26, 2004

 

DELAWARE SETTLES UNFAIR TRADE PRACTICES CLAIMS AGAINST MEDCO HEALTH SOLUTIONS

Medco to provide price information to doctors and patients

(Wilmington, DE): Attorney General M. Jane Brady joined Attorneys General from 19 other states today in announcing the settlement of claims under state unfair trade practices laws against Medco Health Solutions, Inc. (Medco), the world’s largest pharmaceutical benefits management (PBM) company. An investigation by the states into Medco’s drug switching practices began more than two years ago and was spearheaded by Attorneys General in Maine, Massachusetts, and Pennsylvania. During stages of the investigation, the states consulted with the Office of the United States Attorney for the Eastern District of Pennsylvania.

Delaware filed a Stipulation and Consent Order to cease and desist in Superior Court today alleging that Medco encouraged prescribers to switch patients to different prescription drugs but failed at times to pass on the resulting savings to patients or their health care plans. The drug switches generally benefited Medco despite Medco’s claims that they saved patients and health plans money. Medco did not tell prescribers or patients that the switches would increase rebate payments from drug manufacturers to Medco. Delaware, along with the other states, alleges that the drug switches resulted in increased costs to health plans and patients, primarily in follow-up doctor visits and tests. For example, Medco switched patients from certain cholesterol lowering medications to Zocor, but that switch required patients to usually receive follow-up blood tests. 


The settlement prohibits Medco from soliciting drug switches when:

· The net drug cost of the proposed drug exceeds the cost of the prescribed drug;

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

· The switch is made to avoid competition from generic drugs; or

· It is made more often than once in two years within a therapeutic class of drugs for any patient.



The settlement requires Medco to: 

· Disclose to prescribers and patients the minimum or actual cost savings for health plans and the difference in co-payments made by patients;

· Disclose to prescribers and patients Medco’s financial incentives for certain drug switches;

· Disclose to prescribers material differences in side effects between prescribed drugs and proposed drugs; 

· Reimburse patients for out-of-pocket costs 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 the drug switch and receive the initially prescribed drug;

· Monitor the effects of drug switches on the health of patients; and

· Adopt a certain code of ethics and professional standards.


In addition, Medco will pay $20.2 million to the states, $6.6 million to the states in fees and costs, and about $2.5 million to patients who incurred expenses related to a certain switch between cholesterol controlling drugs. Some states, including Delaware, have elected to receive prescription drug cards in lieu of their monetary payment. The value of Delaware’s prescription drug cards, which will be distributed to low income, disabled or elderly consumers, is $125,000. States receiving a monetary payment must use the funds to benefit low income, disabled, or elderly consumers of prescription medications, to promote lower drug costs for residents of the state, or to fund other programs reasonably targeted to benefit a substantial number of persons affected by the conduct covered in the complaint.

Attorney General Brady said, ““Pharmaceuticals represent a large portion of health care costs both to participating plans and to patients. This settlement will help ensure that one of the nation’s largest pharmacy benefit managers, Medco, is dealing fairly with consumers, will work to reduce drug costs for the benefit of its member plans, and will adopt standards for its pharmacists to ensure ethical practices.” 

Medco is the nation’s largest PBM, with over 62 million covered lives. PBMs contract with health plans to process prescription drug payments to pharmacies for drugs provided to patients enrolled in the health plan. In the thirty years since the first PBMs appeared, their services have evolved to include complex rebate programs, pharmacy networks, and drug utilization reviews. 

The participating states are: Arizona, California, Connecticut, Delaware, Florida, Illinois, Iowa, Louisiana, Maine, Maryland, Massachusetts, Nevada, New York, North Carolina, Oregon, Pennsylvania, Texas, Vermont, Virginia and Washington. 

###