Kmart Claims It’s Taking Hit on Pharma Costs

     CHICAGO (CN) – Pharmacy benefit management giant Catamaran Corporation engaged in a scheme against pharmacies to boost its own profits, Kmart claims in a lawsuit.
     In a complaint filed Monday in Cook County Circuit Court, the retailer claims Catamaran “improperly manipulated prescription reimbursements owed to pharmacies … inflating profits to make Catamaran a more inviting acquisition target.”
     Catamaran and other pharmacy benefit management companies act as middle men between pharmacies and health insurance plans, and earn profits through administrative fees, benefits from pharmaceutical companies, and a system that “enables PMBs to pocket the ‘spread’ between charges paid to pharmacies and amounts collected from plans” for drugs, the complaint says.
     While the government regulates the prices pharmacy benefit management companies are allowed to charge “because of the mischief that PBMs like Catamaran have wrought,” Kmart says it has seen dramatic reductions made to its reimbursement payments, and that it’s been charged inflated fees.
     It also claims Catamaran has delayed owed payments and refuses to share its pricing lists or discuss the issues at all.
     According to the complaint, the amounts Catamaran has been paying Kmart “bear little relationship to the drugs’ pricing in the market place,” and payments “are often less than Kmart’s drug costs.”
     “PMBs that pay providers less than their costs for generic drugs are not ‘reimbursing’ providers at all,” the lawsuit says.
     Kmart, which operates over 700 pharmacies in 44 states, says it has incurred at least $38 million in damages thanks to Catamaran’s allegedly illegal practices. Catamaran, on the other hand, has “experienced explosive growth” over the past five years, reporting revenues of $5 billion in 2011 to $21.6 billion in 2014, the complaint claims.
     Kmart’s lawsuit says Catamaran’s “scheme apparently worked,” as it was acquired in July for $12.8 billion.
     That merger itself was the subject of several class action lawsuits filed by shareholders that said Catamaran was undervaluing the company in the sale.
     Several other charges have been filed against Catamaran recently, including a North Carolina class action lawsuit that says the company created an illegal and fake group disability insurance plan, luring in consumers with the late actor Christopher Reeve as a spokesperson.
     In February, 55 independent Pennsylvania pharmacies sued Catamaran, saying they were losing money filling prescriptions through the company as well.
     Kmart says its “efforts to negotiate in good faith with Catamaran to resolve these disputes informally have been rejected by Catamaran at every turn.” It is suing for Breach of Contract and violations of state Prompt Pay and Maximum Allowable Cost Disclosure laws.
     Kmart is represented by Greenberg Traurig LLP in Chicago and Boston.
     Representatives for Catamaran could not immediately be reached for comment.

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