Health Law Update

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In response to a decision to deny coverage of approximately 1,000 active ingredients that are widely used by compounding pharmacies to create topical treatments, three compounding pharmacies have filed a lawsuit against the pharmacy benefit manager (PBM) at the center of the dispute. The lawsuit alleges that Express Scripts is illegally denying prescriptions and causing patients to either opt for more expensive treatment options or forgo medical care altogether. The lawsuit further alleges that the PBM is violating federal law by changing the terms of affected health plans by blocking coverage for compounding medicines and ingredients that are not excluded under the plan. Interestingly, while the PBM has not publically commented on the lawsuit, the PBM has published an <a href="http://lab.express-scripts.com/insights/drug-options/closing-the-compounding-loophole">explanation</a> of the related policy change on its website.

The lawsuit stems from the PBM denying claims as a result of recent increases in pricing for compounding pharmacy products.  According to the pharmacies, the increases in costs were due to a combination of general supply and demand issues and how compounding pharmacies claims are submitted. For example, in 2012, the National Council on Prescription Drug Programs, which sets standards for billing practices, issued a change that permitted compounding pharmacies to bill for all ingredients. Previously, compounding pharmacies could bill for only the most expensive ingredient. This change led to an increase in prices, because some ingredients suppliers are now charging higher prices for all ingredients. In addition to a change in claims submission, prices for some compounded medicines have increased due to a lack of commercially available drug options. However, in response, the PBM points to the fact that the prescriptions in question are for products that are not approved by the Food and Drug Administration (FDA). In addition, the PBM points to the safety record associated with some compounding pharmacies.

It will be interesting to see how this lawsuit plays out. Both pharmacies and payors have a lot riding on the potential outcome. Consequently, this will be a very hot topic in the near future that both sides will want to monitor.

Pharmacy Benefit Manager Faces Lawsuit by Compounding Pharmacies