The Supreme Court declined to take up a lawsuit debating whether a pharmacy benefit manager has a fiduciary duty to lower drug prices, handing the industry a major win.
The court announced Monday it will not take up the class-action lawsuit John Doe vs. Express Scripts. The decision comes amid increased scrutiny from the federal government and Congress on the PBM industry’s role in the drug supply chain.
The lawsuit focuses on whether a PBM has a fiduciary duty under the Employee Retirement Income Security Act (ERISA) to lower drug prices if it has the ability to do so.
Two plan sponsors and two individuals filed the lawsuit over a deal between Anthem and Express Scripts brokered in 2009 where Express Scripts would perform PBM services for Anthem by processing claims for participants that fill prescriptions at certain pharmacies, the original Supreme Court filing said.
But the lawsuit argued that the deal enabled Express Scripts to exclusively set prices for prescription drugs and control what Anthem charged self-funded plans and participants for the products, the filing added.
In addition, Anthem agreed to sell its PBM businesses to Express Scripts, and the lawsuit argued that in turn gave the PBM a fiduciary duty under ERISA to keep drug prices at certain levels.
It also argued the “resulting higher drug prices that [Express Scripts] charged Anthem under the PBM agreement were passed on to the self-funded ERISA plans that entered administrative services only agreements with Anthem and to plan participants in their co-insurance payments.”
A lower federal court threw out the lawsuit, arguing that it didn’t do enough to prove that Anthem or Express Scripts performed fiduciary duties for ERISA plans when the actions took place. An appellate court also ruled against the plan holders.
Under ERISA, a plan’s fiduciary duty includes acting solely for the interests of the beneficiary.
However, the appellate court found that Anthem was not acting as an ERISA fiduciary when it made the PBM deal as an “entity is not a fiduciary” when it makes a corporate business decision even if it could affect how plan participants pay for drug prices.
The Supreme Court did not give a reason for not taking up the lawsuit, as is customary.
The deal between Express Scripts and Anthem eventually soured, and Cigna bought the PBM giant for $67 billion in 2018.
The decision comes amid heightened scrutiny of the PBM industry, especially surrounding its practices on drug prices. The Federal Trade Commission is demanding records and documents from six major PBMs. It also announced a new enforcement policy for PBM rebates and fees that can prohibit competitors from targeting lower-cost drug alternatives.
A key Senate panel also passed out of committee legislation that would introduce several reforms to PBMs, including outlawing practices such as spread pricing or clawback fees.