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Drug benefits company to pay $20 million for pricing claims, says AG Cooper

Release date: 4/26/2004

Raleigh: Attorney General Roy Cooper today announced a major pharmaceutical pricing settlement worth more than $20 million with the nation’s largest drug benefits company.

“This company switched patients’ drugs so that it could win rebates from drug makers,” said Cooper, who leads the National Association of Attorneys General’s Pharmaceutical Pricing Task Force with two other attorneys general. “Doctors and patients, not a drug benefit company, should decide what medicine is right for patients.”

Cooper today joined Attorneys General from 19 other states to announce that Medco Health Solutions, Inc., a pharmaceutical benefits management company for more than 62 million consumers, has agreed to pay $20.2 million. Today’s settlement resolves charges that Medco violated state unfair trade practice laws by encouraging doctors to switch their patients to different prescription drugs, then failing to pass on the resulting savings to patients or their health care plans.

As a pharmaceutical benefits management company, Medco contracts with health plans to process prescription drug payments for drugs provided to patients enrolled in the plan. The states allege that Medco engineered drug switches to benefit the company despite its claims that patients and health plans would save money. Medco did not tell doctors or patients that changing drugs would increase the rebate payments that Medco got from drug manufacturers. Changing drugs often led to higher costs for patients and health plans due to added follow-up doctor visits and tests. For example, Medco switched patients from certain cholesterol lowering medications to Zocor, a switch that usually meant patients had to receive follow-up blood tests.

Under the settlement, Medco will pay $20.2 million to the states to benefit low income, disabled, or elderly consumers of prescription medications and to promote lower drug costs. North Carolina’s share is more than $1 million. Medco will pay another $2.5 million to patients who incurred expenses when they switched cholesterol drugs. The settlement also prohibits Medco from soliciting drug switches when the net cost of the new drug exceeds the cost of the current drug, when the current drug has a generic equivalent and the new drug does not, when the switch would be made to avoid competing with a generic, and when a patient’s drug is switched more than once within two year’s time.

In addition, Medco will now promote pricing transparency by telling doctors and patients the minimum or actual cost savings if they choose to change drugs. The settlement requires the company to disclose financial incentives it receives for drug switches and to adopt a code of ethics and professional standards. Doctors will have to authorize all drug switches and patients will be told that they can decline to switch drugs. If they do switch, Medco is required to let patients know that the company will reimburse them for any related out-of-pocket health care costs. Medco must also notify doctors about the difference in side effects between drugs and monitor the health effects of drug switches.

The states’ investigation of Medco began more than two years ago. Joining North Carolina in today’s settlement are: Arizona, California, Connecticut, Delaware, Florida, Illinois, Iowa, Louisiana, Maine, Maryland, Massachusetts, Nevada, New York, Oregon, Pennsylvania, Texas, Vermont, Virginia and Washington.