^{Posted on April 28, 2004}

Toward Openness in Drug Purchases

Toward Openness in Drug Purchases
April 28, 2004
The New York Times

The veil of secrecy that shrouds the operations of the middleman companies that manage drug benefits for tens of millions of Americans was lifted a bit this week when the nation’s largest manager of pharmacy benefits agreed to greater transparency. If the settlement reached by that company, Medco Health Solutions, and litigators representing 20 states and the federal government becomes common practice, it may ease suspicions that the companies managing benefits make deals that favor their own financial interests rather than those of the patients or the health plans they serve.

In theory, the middleman companies are supposed to keep drug prices low by negotiating favorable deals with pharmaceutical manufacturers and passing on the savings to health plans, employers and other clients. But lawsuits filed by 20 states and the United States attorney in Philadelphia alleged that Medco had sometimes made deals to benefit itself and failed to pass on sufficient savings to its customers. Indeed, the suits contended that Medco, in return for higher rebates from manufacturers, had sometimes persuaded doctors to change patients’ prescriptions in ways that had actually increased the costs for the patients and their health plans. Medco was accused of pocketing a lot of the rebate money and failing to tell clients it had done so.

Without admitting any wrongdoing, Medco has agreed to pay a modest cash settlement and, more important, to change its business practices. The settlement prohibits Medco from seeking to switch drugs if the net result would be higher costs for the patients or the drug plans. Medco will also reveal to prescribers and their patients any financial incentives it receives for switching drugs. These and other requirements could help rein in these largely unregulated companies as they assume a major role in administering the new Medicare prescription drug benefit.