HOUSTON (CN) - A pharmacy owner claims in a federal antitrust lawsuit the nation’s largest health insurer, UnitedHealth Group, is trying to squeeze it out of the $100 billion specialty drug business.
Lead plaintiff Cedra Pharmacy Houston accuses UnitedHealth Group of blocking its new pharmacies in Texas and California from a network that handles claims for 65 million Americans.
The market for specialty drugs--high-cost medications that treat chronic conditions like hepatitis C, HIV, multiple sclerosis, rheumatoid arthritis, and hemophilia--is expected to jump from $100 billion to $400 billion by 2020, according to the complaint.
Cedra says it started its business with a specialty pharmacy in the Bronx in 2013, then opened two more in Manhattan before getting licenses to sell drugs in 30 states and earning accreditation from two organizations with such high standards that they have only accredited a total of 63 pharmacies out of thousands in New York state.
According to Cedra, the biggest markets for prescription drugs in the United States are New York, Texas and California, and shortly after opening its Bronx pharmacy it started a brisk business filling orders by mail for Texas clients.
"By 2015, Cedra Bronx was doing over $20 million in business filling prescriptions for various specialty drugs in Texas," Monday’s lawsuit states.
Cedra says it found success despite a system that's stacked against independent pharmacy owners, in which pharmacy benefit managers affiliated with, or owned by, major health insurers like UnitedHealth Group own large in-house mail-order specialty pharmacies.
According to the 53-page lawsuit, most health insurers contract exclusively with one pharmacy benefit manager (PBM) to handle all their members' prescription claims.
"To be able to service patients who have a particular health insurance plan, a pharmacy must enter into an agreement with a specific PBM to participate in its network," the lawsuit states.
Cedra says that UnitedHealth Group-owned pharmacy benefit manager Catamaran/ORX, which UnitedHealth Group formed in 2015 by acquiring Catamaran and merging it with UnitedHealth Group's benefit manager OptumRx, is one of three PBMs, along with CVS Caremark and Express Scripts, that control most of the prescription drug market.
According to the lawsuit, Catamaran/ORX accounts for 22 percent of all prescription claims nationwide.
Because of this, Cedra says independent pharmacy owners cannot survive without access to its network of patients.
Cedra adds that the 2015 Catamaran/ORX merger also combined two large specialty pharmacy companies, Salveo and BriovaRX, bringing them all under UnitedHealth Care Group, and creating an unfair advantage. Because they have better access to patients' data and claims records than independent pharmacists, they can more effectively solicit patients and their doctors for specialty pharmacy business, Cedra says.
Cedra claims OptumRx changed its rules in the spring of 2015 while in merger talks with Catamaran, blocking Cedra from shipping orders to Texas from New York. So Cedra opened two pharmacies in Texas--one in Houston and one in Dallas.
It recently opened a pharmacy in Los Angeles as well and filed applications for all three with Catamaran/ORX for access to patients in its network.
Cedra says despite federal and state laws in California and Texas that obligate Catamaran/ORX to admit any pharmacy "ready and willing to meet the same standards and conditions as other network pharmacies," Catamaran/ORX denied its Houston pharmacy's enrollment application in June 2016, then denied its Dallas pharmacy in January of this year.
According to Cedra, Catamaran/ORX is stalling on the network-enrollment application it filed for its Los Angeles pharmacy in June.
"For six months, ORX simply refused to act upon Cedra LA’s application or provide any notice of the reasons for what amounted to an effective denial," the lawsuit states.
Cedra accuses Catamaran/ORX of basing the network-access denial for its Houston pharmacy on a bogus "invoice reconciliation audit" done by UnitedHealth Services.
According to the complaint, such audits try to find out if the pharmacy is submitting fraudulent claims. But Cedra says the audit was "unprecedented and illogical" because the Houston pharmacy had just opened and the audit was a thinly veiled attempt to justify denying it access to Catamaran/ORX's network.
With its Houston pharmacy's second application for admission into the network pending in September, Cedra says UnitedHealth Group audited its flagship pharmacy in the Bronx and three other Cedra pharmacies in New York City.
"These audits ultimately concluded with no negative findings, but the timing of the simultaneous audits, which coincided with applications for Cedra Houston, Cedra Dallas, and Cedra LA, was meant to send a message to Cedra owners: back down," the complaint states.
Cedra says UnitedHealth Group's CEO has made clear its goal of squeezing Cedra out of the specialty pharmacy business to grab a bigger share of the market.
"UnitedHealth’s CEO recently stated, regarding defendants, that: 'We have strong momentum in specialty pharmacy, where we expect full year 2017 revenues to increase 20% over last year and growth momentum to continue into 2018,'" the lawsuit states, quoting CEO David Wichmann during an Oct. 17 earnings call in which he reported company revenue of $50.3 billion for the third quarter of 2017.
Cedra seeks treble damages for lost profits caused by UnitedHealth Care's denial under the federal Racketeer Influenced and Corrupt Organizations (RICO) Act and Sherman Act. It also makes Texas law claims of unfair competition and tortious interference and says the UnitedHealth Group defendants violated a California "fair procedure" law.
UnitedHealth Group did not respond Tuesday to a request for comment.
UnitedHealth Group’s subsidiary UnitedHealth Care Services Inc. and several companies that merged to form UnitedHealth Group's pharmacy benefit management business Catamaran/OptumRx are also named as defendants in the case.Follow @@cam_langford
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