Regional community pharmacies have long utilized mail delivery as an effective method to distribute their patients’ medications and supplies, but they appear to be increasingly concerned about getting “slammed” by large national Pharmacy Benefit Management companies (PBMs), leading these community pharmacies to pursue creative alternatives to defend their market position. The perceived increase in slamming and pharmacies’ often futile litigious responses, may lead a number of successful mid-sized companies to consider to band together or sell outright in response to PBMs’ stepped up competitive pressure.
Recent Slamming Lawsuit Raises Eyebrows
This emerging trend of slamming became part of broad public discourse earlier this August, when five small community pharmacies filed a class action lawsuit against Express Scripts Inc. (ESI). These pharmacies allege that ESI improperly used their customer information and prescription data to divert customers to ESI’s own mail order pharmacy business, ultimately stealing their customers. Pharmacies have long referred to this practice as “slamming” because they only become aware of this transition when a refill is requested by a customer and is rejected by its PBM. Pharmacies are then notified that the prescription has been switched to “mandatory mail order” and that only the PBM’s wholly-owned pharmacy will be permitted to fulfill the prescription’s refills.
These pharmacies allege that ESI improperly used their customer information and prescription data to divert customers to ESI’s own mail order pharmacy business, ultimately stealing their customers. Pharmacies have long referred to this practice as “slamming” because they only become aware of this transition when a refill is requested by a customer and is rejected by its PBM.
A Possible Source of the Conflict
However, slamming doesn’t appear to be entirely without substantiation. In fact, many of these community pharmacies have specific contractual language with PBMs that significantly restricts their use of mail delivery without accreditation as a registered mail order pharmacy. What makes this so antagonistic is that these restrictions have not been consistently or universally enforced, and their application appears to lack transparency.
Are There Any Legal Precedents?
This also isn’t the first time pharmacies have tried to resolve this issue in the courts. In November 2015, Linden Care, a leading provider of specialty pharmacy services to the pain management industry, was dropped by ESI’s network and then filed suit. Linden Care requested that the courts reverse the termination, claiming that ESI, which owns its own specialty pharmacy, was trying to eliminate a competitor. A U.S. District Court ultimately denied Linden’s request, stating that they had failed to make “a clear showing that it was entitled to the relief requested” or that “extreme or very serious damage will result”. PBMs were able to fend off this and many other lawsuits.
What This Might Mean for Other Community Pharmacies
So, what does this mean for today’s community pharmacies? We would anticipate that as more community pharmacies become aware of the practice of PBM slamming and learn that their peer pharmacies are not prevailing in litigation, they may consider alternatives such as banding together with other regional or similarly-focused pharmacies to create more market share and larger networks of loyal customers, who might carry enough influence with health plans and payors to help limit PBMs’ abilities to slam. The creation of new mega pharmacy chains may be one of the few alternatives available to local community pharmacies to defend against the growing influence and will of PBMs.