Lawsuit says Caremark Rx pockets money saved on drugs - 07/29/04

Article from the Tennessean.com

Caremark Rx Inc. is the target of a lawsuit saying that the company's business practices violate federal law and drive up prescription drug costs for members of the pharmacy benefit plans it manages.

The lawsuit was filed late Monday in U.S. District Court in Nashville. It is one of more than a half-dozen cases that have been brought against the pharmacy benefit management industry recently by a multi-state group of lawyers.

''It's a consortium of lawyers who have banded together to cure the ills of the pharmacy benefit management industry,'' said Brentwood attorney John A. Day, who filed the lawsuit here.

The lawsuit comes while Caremark's business practices are under review by attorneys general in as many as 19 states, and it is defending itself against a whistle-blower lawsuit in Florida that accuses Caremark of reselling medicines in that state and not reimbursing a government health plan. Caremark denies any wrongdoing.

The lawyers' group has previously filed two other cases against Caremark in Birmingham, Ala. It has a lawsuit pending against Medco, the largest pharmacy benefit manager in the country, filed in White Plains, N.Y. Other cases have been filed in St. Louis, Los Angeles and in New Jersey against other such companies, Day said.

Caremark spokesman Gerard Carney said the company had not seen the new lawsuit and could not comment on it.

Caremark, which has $23 billion in annual revenues, is the nation's second-largest provider of pharmacy benefit services to employers and health plans. It negotiates discounts from drug makers and distributes prescriptions through either its own mail-order operation or through retail pharmacies.

The lawsuit in Nashville says that the way Caremark negotiates rebates and discounts with drug manufacturers and pharmacies violates federal laws governing how self-insured employers' health plans operate.

The lawsuit was filed by Day on behalf of Robert E. Moeckel, who is a participant in a benefit plan operated by John Morrell and Co. The company, a meat processor, is a Caremark client, the lawsuit said. Moeckel works for Morrell in the Midwest. His lawsuit was filed in Nashville because Caremark has its headquarters here, court documents said.

The lawsuit says that Caremark keeps discounts from drug makers and pharmacies instead of sharing them with members of the Morrell benefit plan. It says Caremark secretly negotiates rebates for drugs and keeps that money. It also says that the company provides plan members with expensive drugs, instead of cheaper alternatives, to get rebates.

Moeckel seeks class-action status for his lawsuit. If allowed by the court, employees covered by other companies' self-insured health plans could join the suit.

Caremark won a legal victory last week in a lawsuit that sought to block it and other providers of prescription plans from offering better deals to customers who order prescriptions through the mail rather than buying drugs at local pharmacies.

Davidson County Chancellor Richard Dinkins dismissed that case, saying that the federal laws governing employee benefit plans prohibited its filing under Tennessee's consumer protection laws. That lawsuit had been brought by two employees of Ryder Integrated Logistics, another Caremark client.