Injunction Protects District Residents from 10 Percent Hike in rescription Drug Costs

New Low-Income & Uninsured Prescription Drug Program Left Fully Intact; NOT Affected by Action

Washington, DC; 12.22.04 — For the second time this year, a federal Court has rejected a state or local jurisdiction’s efforts to impose sweeping new rules on pharmacy benefit managers (PBMs) that would only serve to empower the drug manufacturers and increase consumers’ prescription drug costs, the Pharmaceutical Care Management Association (PCMA) said today. Yesterday’s decision by the US District Court in Washington, DC blocking one section, Title II, of Access Rx Act of 2004 from taking effect recognizes the distinct and unique role PBMs play in the drug delivery system and finds invalid and unconstitutional states’ efforts to impose onerous disclosure requirements on PBMs, the association said. Earlier this year, a federal Court blocked a similar law from taking effect in the state of Maine.

In ruling late yesterday, the US District Court for the District of Columbia granted PCMA an interim injunction blocking enforcement of only Title II of DC’s Access Rx Act. The other Titles of the Act, including those pertaining to prescription drug coverage for low-income seniors and uninsured residents and drug manufacturer-marketing disclosure requirements, are NOT the focus of the action and have been left fully intact by the Court. According to an independent analysis by PricewaterhouseCoopers, if allowed to become effective, Title II would result in a 10 percent increase in prescription drug costs for District residents and consumers â?? or $600.7 million over the next decade in DC alone.

“This ruling from the Federal Court is a blow to the drug makers’ lobby and will help protect District residents from an unnecessary 10-percent increase in prescription drug costs,” said PCMA President Mark Merritt. “Taken together, the Maine and DC injunctions should be a clear signal to any policymaker contemplating imposing fiduciary and disclosure requirements on PBMs that such an approach is unworkable, invalid, and unconstitutional.”

The US District Court for the District of Columbia is the second federal Court this year to rule invalid and unconstitutional state and local efforts to impose misguided fiduciary and disclosure requirements on PBMs. In March 2004, the US District Court in Bangor, Maine issued a preliminary injunction deeming LD 554, the first PBM fiduciary-disclosure law passed by any State in the Union, unconstitutional as conflicting with federal ERISA law and constituting an unfair “taking” of PBMs’ confidential and proprietary trade information.

In granting the Order, US District Court Judge Ricardo M. Urbina noted yesterday that “the evidence before the court indicates that the PBM industry is highly competitive, enhances drug safety by alerting pharmacists to dangerous drug interactions and saves consumers money by controlling drug costs.” Judge Urbina specifically upheld PCMA’s argument that Title II of the DC Access Rx Act of 2004 would represent an “illegal takings” of private property. In doing so, Judge Urbina also noted that “the evidence indicates that if enforced, Title II could have the unintended effect of actually driving the PBM business and its attendant benefits out of the District of Columbia.”

During last year’s Medicare prescription drug debate, the non-partisan Congressional Budget Office estimated public disclosure of drug pricing information would increase Medicare drug benefit costs by $40 billion and increase seniors’ premiums by more than five percent in 2006 alone. Congress ultimately rejected this approach, but preserved Medicare’s ability to make sure seniors were receiving meaningful discounts on their prescriptions.

PCMA is the national association representing America’s pharmacy benefit managers (PBMs). PBMs administer prescription drug plans for more than 200 million Americans with prescription drug coverage provided through the nation’s small and large employers, Taft-Hartley union plans, health insurers, state and federal-employee benefit plans, and Medicare Advantage health plans. PBMs help drive down the cost of prescription drugs for consumers and plan sponsors â?? on average by 25 percent â?? by negotiating discounts with drug manufacturers and retail pharmacies. These savings are, in turn, passed on to consumers. PBMs also provide consumers with important quality protections, such as disease management and physician and patient education.

In 2004, ten states have rejected PBM fiduciary and/or disclosure legislation: California, New York, Florida, Washington State, Maryland, Minnesota, Mississippi, Kansas, Iowa, and Vermont. In contrast, just one jurisdiction other than the District of Columbia â?? South Dakota â?? has approved PBM disclosure legislation in 2004. South Dakota’s legislation does NOT designate PBMs as fiduciaries.