Express Scripts (NSDQ:ESRX) and other pharmacy benefit managers have been accused of giving Mylan‘s (NSDQ:MYL) EpiPens favorable placement on drug formularies in exchange for kickbacks, according to a proposed class action filed in Kansas federal court this week.
The suit was brought by people covered under Employee Retirement Income Security Act benefit plans. These consumers claim that pharmacy benefit managers breached their fiduciary duties under the Employee Retirement Income Security Act of 1974, alleging that drugmakers like Mylan hike the price of EpiPens and other devices to give a portion of the profit back to PBMs, who in turn give them preferential placement on drug formularies.
PBMs can direct business to the drugmakers that pay the highest rebate, the consumers reportedly said, since they represent thousands of people on healthcare plans.
“While PBMs could use this market power to drive down the prices for medical products by forcing manufacturers to lower the list price, instead they and manufacturers have figured out a way to game the system for their mutual benefit,” the complaint said, according to Law360.
“Defendants obtain large payments from the manufacturers in exchange for granting access to the exclusionary formularies, increasing the PBM take, and manufacturers like Mylan pay rebates without diminishing — and, at times, even increasing — their profits because their net profits are protected by the ever-increasing list prices, and sales are ensured through formulary placement.”
Express Scripts’ VP of corporate communication told Law360 that the suit has “absolutely no merit” and that the company plans to “vigorously” defend itself.
Mylan has come under fire in the last year after reports revealed that the company raised the price of its EpiPen product by more than 500% over the past decade. Mylan has since launched a generic version of its emergency allergy device, which sells at $300 per two-pack – a 50% discount on the price of its EpiPen device.
In August, Express Scripts announced that it would include Mylan’s EpiPen emergency allergy device on its 2018 formulary, favoring the drugmaker’s product over auto-injectors from competitors like Impax Laboratories (NSDQ:IPXL) and Kaleo.
The largest pharmacy benefit manager in the U.S. has practiced excluding certain medicines from its list of covered drugs since 2014, pointing towards the high prices taken on by health insurers.