Ohio AG signs on to important pharmacy middleman case

By: - July 20, 2021 12:40 am

Photo by Marty Schladen, Ohio Capital Journal.

Ohio Attorney General Dave Yost has joined a lawsuit testing states’ power to regulate powerful middlemen who control the way prescription drugs are managed.

Yost last week notified the 8th U.S. Court of Appeals in St. Louis that Ohio was joining 30 other states who are urging the court to uphold North Dakota laws meant to regulate pharmacy middlemen known as pharmacy benefit managers, or PBMs.

Three PBMs — CVS Caremark, OptumRX and Express Scripts — are said to control 77% of a marketplace that is worth in excess of $400 billion a year in the United States. 

They decide which drugs are covered by insurance. They negotiate big, often-secret rebates from drugmakers. And they decide how much to pay the pharmacies — many of which they own — that dispense them.

Critics say the corporate giants are the real driving force behind the high cost of drugs. Community pharmacists say that the big PBMs and their affiliates are driving them out of business.

For their part, the PBMs say they use their size and sophistication to save money for consumers, insurance plans and government programs such as Medicare and Medicaid.

Many state governments, including those in Ohio, Arkansas and North Dakota, disagreed and passed laws, filed lawsuits and have taken other steps in an attempt to rein in the pharmacy middlemen. Last year, the U.S. Supreme Court heard arguments over one such law that was passed in Arkansas. 

The PBM industry argued that Congress — not the states — had the power to regulate PBMs working for insurance companies that have customers in multiple states. 

They’re often the same company. Since 2014, the three big PBMs have bought or been bought by major insurers and the companies have fought state regulation.

The Eighth Circuit found for the companies and against Arkansas. But in a ruling that surprised many, the Supreme Court in December unanimously reversed that decision.

The move invalidated another Eighth Circuit decision — this one saying that federal law preempts North Dakota state laws meant to regulate PBMs. The Supreme Court this year ordered the Eighth Circuit to reconsider the case.

Thirty states lined up to sign on to a friend-of-the-court brief in support of the North Dakota law. Last week, Yost joined them.

“States have an inherent interest in ensuring their residents can afford their lives,” the brief says. “Consumers across America struggle to afford healthcare. A principal cause for their plight is the increasing, unsustainable cost of prescription drugs. States have sought to address these concerns in myriad ways, more recently by regulating a source of these increasing costs: pharmacy benefit managers (PBMs) and their business practices.”



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Marty Schladen
Marty Schladen

Marty Schladen has been a reporter for decades, working in Indiana, Texas and other places before returning to his native Ohio to work at The Columbus Dispatch in 2017. He's won state and national journalism awards for investigations into utility regulation, public corruption, the environment, prescription drug spending and other matters.