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Glucose Test Strips Overpricing
Prescott, et al. v. CVS Health Corporation, et al.
United States District Court, District of New Jersey
Case No. 17-13066 (BRM)(LHG)
On May 24, 2017, Keller Rohrback L.L.P. filed a class-action lawsuit against the nation’s three largest pharmacy benefit managers (“PBMs”), Express Scripts, OptumRx, and CVS Caremark, and the four dominant blood glucose test strip manufacturers, Abbott, Bayer, Johnson & Johnson, and Roche, who produce the following well-known and widely-prescribed test strips: FreeStyle, Contour, OneTouch, and Accu-Chek.
For patients living with diabetes, testing blood sugar levels throughout the day is a critical part of managing the disease. The complaint alleges that the PBMs—insurance industry middlemen who negotiate drug prices and create drug formularies that determine how much patients pay—conspired with the test strip manufacturers in a “Test Strip Pricing Scheme” to artificially inflate the price of test strips for their own collective benefit. This profiteering has directly injured individual patients and other purchasers of test strips financially and put the lives of millions of people with diabetes at risk.
Test Strip Pricing Scheme Explained
The Test Strip Pricing Scheme alleged in Plaintiffs’ complaint explains how PBMs sell exclusionary or preferential access to their formularies in exchange for a cut of rebates and other fees paid by the drug manufacturers to the PBMs. Formularies are ranked lists of drugs that health insurers rely upon to determine how much of their members’ drug costs they will cover.
Manufacturers’ sales depend on access to these enormous purchaser pools for their profits. Although the PBMs claim the rebates and other payments lower the cost of test strips, in fact, this is misleading. The rebates and other payments decrease the cost of test strips for the PBMs and the insurers with whom the rebates are shared, but drive up the cost for consumers, whose pre-deductible or coinsurance payments at the pharmacy point-of-sale are based on the unrebated “list” price.
The PBMs and manufacturers game the system. Instead of competing on price for access to the PBMs’ formularies, the manufacturers compete based on the amount of the rebate and other fees that they pay to the PBMs. To prevent the rebates and other fees—and the wasteful transactional costs created by an increasingly convoluted system of payments—from cutting into their profits, the manufacturers raise what they call the “list” price of test strips.
Meanwhile, considerable rebates to PBMs result in a lower “net” price actually realized by the manufacturers and paid by the PBMs. The higher the “list” price, the higher the rebate and other fees, and the larger the profit to the PBMs. The scheme benefits manufacturers because they are able to maintain or increase their sales of ever-more-expensive test strips.
The result is a vicious cycle of “list” price increases by manufacturers, vying to win the favor of the PBMs. Consumers with out-of-pocket payment obligations, a large and growing population, are charged an amount based upon the artificially inflated “list” price. This includes the uninsured and people in a variety of types of health plans with co-insurance, co-payment, and high-deductible requirements.
Plaintiffs’ complaint seeks both monetary and injunctive relief on behalf of health plan participants and beneficiaries, as well as uninsured consumers. Plaintiffs are requesting remedies that would refund their overpayments and force Defendants to disgorge their ill-gotten gains. Critically, the injunctive relief would impose disclosure requirements going forward that will increase transparency in a market where a hidden dual pricing system has driven test strip prices through the roof—at severe financial and physical costs to users and purchasers of test strips. Disclosure of this information will make it more difficult for the Defendants to manipulate the cost of test strips in the future, should they attempt to replace the current system with some other scheme.
If you purchase prescription test strips produced by any of the above-listed manufacturers, you may be paying artificially inflated prices. Please contact attorney Gretchen Obrist to learn more about whether you too have been subject to unlawful pricing. Call 800.776.6044 or email .
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