Community pharmacies see big win against Pharmacy Benefit Manager OptumRX

Listen to this article

By Steve Schuster
[email protected]

A Philadelphia lawyer who is representing more than 70 Wisconsin community pharmacies has won a recent case in Marinette County against OptumRx, the nation’s third largest Pharmacy Benefit Manager (PBM).

OptumRx unsuccessfully attempted to force Wisconsin community pharmacies to arbitrate their claims “under an onerous and oppressive arbitration clause,” said Attorney Mark Cuker with Pennsylvania-based Jacobs Law Group.

“Optum is middle man between insurance company and pharmacy,” Cuker noted, who is representing more than 1000 community pharmacies nationally.

“OptumRX underpays pharmacies and steals their customers by diverting business to mail orders,” Cuker added.

According to Cuker, OptumRX pays large chains such as CVS and Walgreens a much higher price for drugs than it does the smaller, independent drug stores.

The result?

“Thousands of independent pharmacies across the country cannot compete and go out of business because they are squeezed so badly by PBMs,” Cuker said.

During an exclusive interview with the Wisconsin Law Journal on Tuesday, former Fitzgerald’s pharmacy owner Michael Pistiner said he was forced to sell out to CVS after almost going bankrupt in 2018-2019.

“In essence, PBMs forced me to lose my business. When I sold my patient files to CVS, I couldn’t tell anyone that PBMs were the biggest problem. I had a hush order on me, Pistiner said.

“Basically, the PBMs caused my demise. PBMs also caused the demise of an independent pharmacy in Oconomowoc, Tobin’s,” he said.

According to Pistiner, when he was in business a few years ago, 18-28% of prescriptions Fitzgerald’s sold to customers were sold below cost, because of PBMs.

Pistiner said that he started working for Fitzgerald’s pharmacy in Whitefish Bay in 1991 and became a co-owner in 2001. By 2015 he was a sole owner, but was forced to close in 2019 when the PBM reimbursement for a $110 bottle of insulin became less than a dollar.

“If I paid $110 per bottle of insulin, I would submit claim to PBM at the usual and customary rate. I would mark it up 20% to around $125. Insurance would say it’s only worth $90. Then the PBM would take out several fees and then on top of that, a large percentage. By the time I got paid it was only a few cents,” Pitstiner said.

“So many smaller pharmacies fell victim to this,” Pistiner added.

“PBMs forced us to close and to be on the brink of bankruptcy,” he said, noting that he sold patient files to CVS because he had no other options.

Meanwhile back in Marinette County, Judge James Morrison ruled on June 29 that not only was OptumRX “not dealing in good faith,” but also their conduct “causes the Court also to be seriously concerned about whether the entire arbitration scheme, as conceived and applied, and as amended, is unconscionable.”

The court noted in the Order Denying Arbitration that “organizations including Optum tend to be large and powerful purveyors of critically important prescription drugs.

Will McKinley of the Menn Law Firm in Appleton was the local counsel representing community pharmacies.

According to Cuker, PBMs are being investigated by Congress, the FTC and several state legislatures for unfair, secret and anticompetitive practices, including their efforts to drive independent pharmacies out of business through a combination of underpaying them, clawing back payments and diverting pharmacy customers to the PBM’s own mail-order pharmacy.

The arbitration clause Optum sought to enforce was guaranteed to make arbitration futile, Cuker said, because it would have required each of the 70+ pharmacies to separately arbitrate their claims before different panels of three arbitrators, with severe limitations on the discovery needed to prove their claims.

Cuker also noted that Federal Arbitration Act (FAA) does not preempt state laws holding such practices unconscionable.

“The Court has the power to declare this unconscionable because Optum’s arbitration clause made it impossible for pharmacies to win. Independent pharmacies would have to spend so much money they would never won,” Cuker added.

According to Cuker, the judge’s decision is a win for both consumers and independent pharmacies.

“Independent pharmacies can vindicate their rights. We can expose these predatory practices of PBMs,” Cuker said.

“Most of my clients (independent pharmacies) feel they can compete if they have a level playing field, but it has been tilted toward large chains and mail order,” Cuker added.

The court denied Optum’s petition in “a resounding opinion,” he noted.

In denying Optum’s petition, Judge Morrison, Wisconsin’s statewide business litigation judge, used strong language:

“[T]his Court must conclude that Optum was not dealing in good faith. This conduct causes the Court also to be seriously concerned about whether the entire arbitration scheme, as conceived and applied, and as amended, is unconscionable. Optum gets to decide the terms of an arbitration agreement even when they have agreed there will not be one, decides when and if it will change those terms, changes those terms without advance notice or negotiation, implements those terms for several months before it affirmatively notifies the pharmacies that substantial, unfavorable changes in the arbitration provisions are being implemented. This Court finds that conduct to be unconscionable as well. When the Court considers the cost of the arbitration (three arbitrators, ten years of experience, limited discovery, etc.) the Court can only conclude that in all but the most substantial disputes the cost of proceeding to arbitration will substantially outweigh any benefit that could be achieved in arbitration and that this will undoubtedly have a substantial chilling effect upon pharmacies presenting objectively meritorious positions.

“‘You can’t fight City Hall so why try’ appears to be the result that this scheme creates. This is the product of a one sided agreement foisted upon pharmacies who need to make a deal with Optum or have a substantial part of a market closed to them and this is fundamentally unfair.”

Cuker praised the judge’s decision.

“I thought Judge Morrison’s opinion characterized the issues with greater insight than any of several other opinions nationally. The Wisconsin Judge, “captured the issues better than any other judge so far because he described how consolidation of the market power in PBMs allows them to force unconscionable terms on small businesses.

The Wisconsin Law Journal reached out to OptumRx for comment; they have not responded.

Pistiner noted that although the new Fitzgerald’s pharmacy has the same location and name, it is in no way affiliated with the previously pharmacy.

The new Fitzgerald’s is owned by Hayat, which consist of a chain of approximately two dozen stores in southeastern Wisconsin.