A $29 million settlement, between the U.S. government and 20 states was announced this week in Philadelphia.   In the settlement which has wide ranging impact, Medco agreed to now inform patients about switching of prescription drugs and other abuses.  Patients must now also be told that Medco receives compensation from pharmaceutical companies to make these switches which provide greater income for the PBM. The settlement also requires the reimbursement of patients for additional monitoring after unauthorized drug switching. 

For additional information please review the following article from the Wall Street Journal.

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A settlement announced yesterday means major changes to a practice that has upset and confused patients.

The case involves the practice of "switching," in which pharmacists persuade doctors to substitute one medication for another, without the patient's knowledge or consent. The switches aren't made for medical reasons. Instead, they result from deals that drug companies have with pharmacy-benefit managers like Medco Health Solutions Inc. Those deals give benefit managers a financial incentive to switch patients to certain drugs.

In yesterday's $29 million settlement, which involved the U.S. government and 20 states, Medco agreed to tell patients when this was happening and give them the opportunity to demand the originally prescribed drug.

In addition, patients will now be told that Medco is receiving compensation from drug companies to make such switches. The settlement also requires Medco to reimburse patients if they need to go to doctor for additional monitoring after switching drugs.

Medco, which is paid by employers to help control the costs of employee drug benefits, is the country's largest pharmacy-benefit manager. It supplies some 60 million people with prescription cards. The company also runs the country's biggest mail-order pharmacy, last year filling 80 million prescriptions.

Other prescription-benefit managers operate in a similar fashion, and some attorneys general have said that they are investigating other firms.

Until now, patients have been relatively helpless bystanders in the switching process, a fact that raised concerns among the state attorneys general and the federal government.

The switching practice further troubled the attorneys general because there appeared to be only minimal savings for the health plans that weren't worth the disruption for patients. In fact, the attorneys general said that in many cases, the health plans and patients ended up paying more because they had to go back to the doctor for testing and monitoring.

Patients in Medco's mail-order program who are switched don't know about it until the medication arrives in the mail. And patients who buy their drugs at a retail pharmacy receive a letter that their medication will be switched when they refill their prescription.

Doctors, too, have complained about requests from pharmacy-benefit managers to switch patients who are already stabilized on drug therapies. Some see the practice as interfering with their medical judgment and patient relationships.

Medco says the agreement was voluntary and that none of the changes it agreed to affects the tools it "considers essential in effectively managing the cost of prescription drug programs." The company, based in Franklin Lakes, N.J., also says that there was "no admission or finding of inappropriate business conduct." The settlement followed a nearly two-year investigation by the attorneys general. Medco notes that some of the practices it agreed to had already been implemented.

Medco helped pioneer the switching practice in the early 1990s by hiring pharmacists to call doctors to get them to change their prescriptions and by creating a preferred list of usually discounted drugs for them to push.

When a patient sends in a prescription to the Medco mail-order pharmacy for a drug that isn't on the preferred list, a Medco pharmacist will call the doctor to switch the prescription to the preferred drug, which usually has a lower co-pay. For prescriptions filled at a retail pharmacy, Medco calls the doctor for permission to switch future prescriptions to preferred drugs. Some physicians acquiesce because they are led to believe that the patients will save money.

Going forward, Medco must disclose to patients its financial interests in recommending a switch. Medco, for example, has a contract with its former parent Merck & Co. to push Merck's Zocor, a cholesterol-lowering drug.

Currently, Medco tells doctors that it is requesting a switch to keep health-care costs down, but doesn't disclose that Medco might have a financial interest in the switch. According to the agreement, Medco must now require its staff pharmacists to "give good faith, professional opinions" and "form an independent professional judgment" that a switch would be in the patient's best interest.

Also, consumers who had their cholesterol drugs switched in the past will be able to get reimbursed for any out-of-pocket costs associated with having to see a physician again after a drug had been changed. In general, any change in cholesterol medications must be followed up by medical tests because certain of the drugs can have a harmful effect on the liver. But Medco's portion of those costs is capped at $2.5 million, and patients will only be reimbursed up to $25 for past cholesterol-drug switches.

Medco has also agreed to pay the states $6.6 million to cover the costs of their investigation, and $20 million in cash or in medications for low-income people, to be split up among the 20 states. In addition, Medco agreed to pay Massachusetts $5.5 million.

From now on, Medco patients will get a letter and a phone call to inform them when a switch has been requested. They will include information on how to get reimbursed if the switch requires medical monitoring.

The settlement comes as companies like Medco are fighting about a dozen newly introduced state legislative proposals that seek to make benefit practices in areas like drug-company payments more open to consumers. States are particularly interested in making the benefit managers disclose more information because of the huge role they are likely to play in the Medicare drug benefit beginning in 2006.

Though the settlement resolves the disputes with 20 states and certain issues with the U.S. Justice Department, there are still claims with the federal agency that are unresolved. The agency still has five pending counts against Medco, including allegations of kickbacks, submitting false claims and unjust enrichment. Medco denies these claims.