Lawsuit Claims Merck-Medco Switches Patients to More Costly Drugs

A number of individuals and employers have filed a group of lawsuits against the pharmacy benefits manager Merck-Medco, alleging that the company "breaches its fiduciary duty" by not disclosing to its customers that it switches patients to more expensive drugs in order to win discounts on other drugs from drug makers, the Wall Street Journal reports. The lawsuits, which are being heard in U.S. District Court for the Southern District in New York, also claim that Merck-Medco employees "persuade" physicians to "switch patients" to pharmaceuticals marketed by the firm's parent company Merck & Co., even if Merck's drugs are more expensive. Attorneys for the plaintiffs argue that "secret deals" between pharmaceutical companies and Merck-Medco "lead to huge profit gains not passed on to customers." But Merck-Medco said that the suits are based on "a series of incorrect factual assertions, which are tied together with assumptions and unsupported conclusions." Although the company "doesn't deny" that patients are sometimes switched to higher-cost drugs, it contends that the patients who are switched do not pay higher co-pays for the more costly medicines. Merck-Medco general counsel David Machlowitz said that his firm often negotiates with pharmaceutical companies for packages of different drugs, which have "varied" prices. He added that "[o]verall," these drug packages are discounted for Merck-Medco customers, "even if individual drugs are higher than their alternatives." Also, Machlowitz denied that Merck-Medco "treats Merck drugs any differently" than other companies' drugs. The Wall Street Journal reports that the timing of the suits against Merck-Medco is "especially important" because PBMs will likely play a "crucial" role in managing the prescription drug discount plan proposed by the Bush administration (Martinez, Wall Street Journal, 8/30). Merck-Medco is one of the PBMs that have agreed to offer discount cards through the plan (Kaiser Daily Health Policy Report, 7/16).

Making the Switch
Meanwhile, the AP/Chicago Tribune reports that some health insurers are "more aggressively trying to switch patients to cheaper medicines." Humana Inc., for example, has launched a campaign to get its members to switch to less-costly medicines. The insurer is sending letters to patients who are taking drugs "for which cheaper options exist," notifying them of "alternative medications" and suggesting that they consult their doctor about "other options." Trigon Healthcare has sent similar letters to 2,500 physicians "with the highest volume of prescriptions." Humana will also aim to "discourage unnecessary use" of costly medicines by implementing a new four-tier payment structure. Drugs listed on the fourth tier would cost patients 25% of what the health plan pays for the medicines (Agovino, AP/Chicago Tribune, 8/29).