US: Express Scripts to Pay $9.5 Million To Settle Drug-Swapping Allegations

Pharmacy-benefits manager Express Scripts
Inc. agreed Tuesday to pay $9.5 million to settle allegations that the
company asked doctors to switch drugs primarily to get bigger rebates
from pharmaceutical companies.

The move all but closes the books on a four-year investigation of practices at pharmacy benefit managers.

"Today's settlement completes our effort to clean up
the PBM industry," said Vermont Attorney General William Sorrell in a
statement. Vermont, which gets a $372,000 cut, was one of the lead
negotiators with the company.

The settlement avoids a potential lawsuit with 29
states and the District of Columbia, which had been investigating the
company's drug-switching practices.

The agreement states that Express Scripts "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," according to the
Vermont attorney general's office.

The question was drug market share -- the higher the
company's share of a certain drug, the higher the rebate it would get
from pharmaceutical companies.

When they asked doctors, "it was often couched in
vague language benefit saying the client would benefit or the plan,"
rather than the company specifically, said Vermont Assistant Attorney
General Julie Brill.

Pharmacy-benefit managers Medco Health Solutions Inc. and CVS Caremark Corp. have already reached agreements with the states over similar issues.

"Now that all three of the nation's largest PBMs are
under orders from our office and the court to reform their practices,
we expect that the rest of the industry will take notice and follow the
requirements we have established," Mr. Sorrell said.

The agreement prohibits Express Scripts from asking
for a drug switch when a drug's cost is higher, when the patent on the
original drug is expected to expire, or if the patient was switched
from a similar drug in the past two years. Vermont said this amounts to
a significant change in Express Scripts' business practices, a claim
the company disputes.

"We're saying that our process essentially complies
with the processes already," said Express Scripts spokesman Steve
Littlejohn. He said that most of the changes were related to
"notification and different forms of communication."

The investigation of Express Scripts began in 2004,
with then-New York Attorney General Elliot Spitzer declaring that
Express Scripts, which manages the state's pharmacy benefits, was
"simply committing fraud."

Mr. Littlejohn said the New York lawsuit, which he
described as a "contract dispute," was still pending. The New York
attorney general's office didn't immediately return a call for comment.

Write to Andrew Edwards at andrew.edwards@dowjones.com

• 182 Health
• 208 Regulation