Hawaii Joins States Suing PBMs Over ‘Rebate’ Programs

Oct. 6, 2023
“Pay-to-play practices directly harm consumers both by artificially inflating the price of medications beyond what many consumers can pay and by restricting consumers’ access to medications,” said Hawaii Deputy Attorney General Ciara Kahahane

Hawaii has become the latest state to file a lawsuit against pharmacy benefit managers (PBMs), alleging that the PBMs’ business practices have driven skyrocketing prices for brand-name prescription medications over the past decade.

The lawsuit was filed Oct. 4 against “the Big Three”—CVS Caremark, Express Scripts, and OptumRx—which, collectively, manage prescription drug benefits for hundreds of thousands of Hawaii residents. The suit says the harmful practices include charging drug manufacturers “rebates,” which are payable directly to the PBMs, in exchange for the favorable placement of drugs on the PBMs’ formularies—a ranked list of prescription medications covered by insurance.

The suit claims that if a manufacturer refuses to increase the rebate it pays to the PBMs, the manufacturer risks its medication being excluded from the PBMs’ formularies entirely—severely impacting the medication’s chance of success and forcing consumers to choose between paying the medication’s full cash price out-of-pocket or switching to a different drug. “The number of medications excluded from the PBM defendants’ formularies increased by 961 percent from 2014 to 2022. Most frequently excluded were medications used to treat chronic conditions, meaning that patients with chronic illnesses were disproportionately affected,” says a press release from the state attorney general’s office. In addition to rebates, PBMs charge manufacturers administrative fees, data fees, and price-protection fees, none of which actually provide a discount to consumers at the point of sale, the release states.

“The skyrocketing costs of prescription drugs pose grave challenges to the people of Hawaii,” says Attorney General Anne Lopez, in a statement. “The Department of the Attorney General will work to hold accountable corporations that unlawfully harm patients to increase their bottom lines.”

“Pay-to-play practices directly harm consumers both by artificially inflating the price of medications beyond what many consumers can pay and by restricting consumers’ access to medications that could save or greatly increase the quality of their lives,” added Deputy Attorney General Ciara Kahahane, in a statement. “The anticompetitive scheme allegedly perpetuated by the PBM defendants takes money out of consumers’ pockets and jeopardizes the well-being of the most vulnerable citizens of our state.”

Other states, including, California, Kentucky and Ohio, have filed lawsuits against PBMs this year. In August, Kentucky Attorney General Daniel Cameron filed a lawsuit against CVS Caremark, Optum Rx, and Express Scripts—for their role in an insulin pricing scheme. The lawsuit alleges that insulin manufacturers and PBMs worked in tandem to manipulate and increase insulin prices. The suit naming PBMs was filed in a prior action pending in the Franklin Circuit Court against insulin manufacturers.

In March 2023, Ohio Attorney General Dave Yost filed suit, accusing pharmacy benefit managers Express Scripts and Prime Therapeutics of using a little-known, Switzerland-based company to illegally drive up drug prices and ultimately push those higher costs onto patients who rely on life-saving drugs such as insulin.

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