Attorney General Larry Long and 28 Other Attorneys General Settle Consumer Protection Claims Against Caremark 

PIERRE, S.D.- Attorney General Larry Long announced that he, along with Attorneys General from 28 other states, entered into a settlement of consumer protection claims against Caremark Rx, L.L.C., one of the nation’s largest pharmacy benefits management (PBM) companies. 

As part of the settlement, Caremark is required to significantly change its business practices.  In addition, Caremark will pay $38.5 million to the States and up to $2.5 million in reimbursement to patients who incurred expenses related to certain switches between cholesterol-controlling drugs.  $22 million of the amount paid to the States in a cy pres payment must be used to benefit low-income, disabled or elderly consumers of prescription medications, to promote lower drug costs for state residents, to educate consumers concerning the cost differences among medications, or for similar purposes. South Dakota will receive $170,000 for this purpose. Caremark will also pay $16.5 million to the states in costs, including $300,000 to South Dakota. 

PBMs enter into contracts with employers and government health plans to process prescription drug claims for drugs provided to patients enrolled in the health plan; negotiate with drug companies to obtain volume discounts; negotiate discounts with participating retail pharmacies to provide dispensing services at a discount; and dispense drugs to patients through PBM-owned mail order pharmacies.  In the thirty years since the first PBMs appeared, their services have evolved to include complex rebate programs, pharmacy networks, and drug utilization reviews. 

Attorney General Long’s Consumer Protection Division filed a complaint against Caremark Rx, L.L.C. and two of its subsidiaries: Caremark, L.L.C. and Caremark PCS, L.L.C. (formerly AdvancePCS).  The complaint alleges that Caremark engaged in deceptive business practices by encouraging doctors to switch patients to different brand name prescription drugs and representing that the patients and/or health plans would save money.  But doctors were not adequately informed of the effect this switch would have on costs to patients and health plans.  Moreover, Caremark did not clearly disclose to their clients plans that rebates accrued from the drug switching process would be retained by Caremark and not passed directly to the client plan.  The complaint further alleges that Caremark restocked and re-shipped previously dispensed drugs that had been returned to Caremark’s mail order pharmacies. 

The settlement generally prohibits Caremark from soliciting drug switches when:

• The net drug cost of the proposed drug exceeds the net drug cost of the originally prescribed drug;
• The cost to the patient will be greater than the cost of the originally prescribed drug; 
• The originally prescribed drug has a generic equivalent and the proposed drug does not;
• The originally prescribed drug’s patent is expected to expire within six months; or
• The patient was switched from a similar drug within the last two years. 

The settlement requires Caremark to:

• Inform patients and prescribers what effect a drug switch will have on a patient’s co-payment;
• Inform prescribers of Caremark’s financial incentives for certain drug switches; 
• Inform prescribers of material differences in side effects or efficacy between prescribed drugs and proposed drugs;
• Reimburse patients for out-of-pocket expenses 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 a drug switch and the conditions for receiving the originally prescribed drug;
• Monitor the effects of drug switches on the health of patients;
• Adopt a certain code of ethics and professional standards;
• Refrain from making any claims of savings for a drug switch to patients or prescribers unless Caremark can substantiate the claim;
• Refrain from restocking and re-shipping returned drugs unless permitted by applicable law;
• Inform prescribers that visits by Caremark’s clinical consultants and promotional materials sent to prescribers are funded by pharmaceutical manufacturers, if that is the case. 

If you have any additional questions about this settlement contact Sara Rabern at 605-773-3215.

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