Walgreens Accused of Overcharging Insured Customers for Generics

CHICAGO (CN) – A California man claims in a federal class action that Walgreens conspired with pharmacy benefit managers to overcharge customers for generic drugs by charging those who use their insurance more money and collecting copays higher than the cost of the medications.

David Grabstald filed the class-action lawsuit in Chicago federal court on Wednesday against Walgreens Boots Alliance Inc., claiming it entered into secret contracts with pharmacy benefit managers, or PBMs, to profit off of its insured customers’ prescription copays.

The PBMs act as intermediaries between insurance companies and pharmacies to negotiate prices that insurance companies have to pay the pharmacies, according to the complaint.

Pharmacies then benefit from having insurance enrollees purchase prescriptions if the pharmacy is in the PBMs’ network.

“As a result, Walgreens is eager to reach agreements with PBMs that will drive more people to the stores, where customers often purchase more than their generic drugs,” the lawsuit states. “These agreements with PBMs are based on secret, undisclosed contracts, under which Walgreens agrees to specific amounts it will charge and collect from insured customers—but the customers can neither see nor learn about these agreements or their terms from the pharmacies, the insurance companies, or anyone else.”

Insured customers pay the amount negotiated between the PBM and Walgreens, even if that amount exceeds the price of the drug without insurance, according to the complaint.

Randal Johnson, president of the Louisiana Independent Pharmacies Association, is quoted in the lawsuit as saying, “It’s actually costing you more to acquire the drug with your insurance than you could if you walked in off the street and you didn’t have insurance.”

The PBMs allegedly receive a “claw back” payment, or whatever the excess payment is, all unbeknownst to the customer.

Grabstald says that most Americans are driven to purchase health insurance specifically to save money on their medications.

According to the complaint, the largest PBMs in the U.S. include CVS Caremark, Express Scripts, Prime Therapeutics, OptumRx and MedImpact.

“Although the customers are told, for example, that they are required to pay $15 in a ‘copay’ for the drug, in reality this is not a ‘copay’ at all because Walgreens is sending a significant portion of the $15 back to the PBMs. The PBMs, far from assisting with the payments, are taking an extra chunk out of the customer’s copayment,” the lawsuit states.

Grabstald says he was insured by Anthem Blue Cross Blue Shield and noticed he was overpaying for his generic drugs at Walgreens with his insurance and that the cost of the drugs without his insurance would have been significantly less.

He claims that Anthem and its PBM, Express Scripts Inc., have a written contract outling the terms under which Express Scripts administers the prescription-drug benefit part of Anthem’s insurance plans. Express Scripts acts as Anthem’s agent in negotiating drug prices pursuant to the agreement, he says.

Walgreens also has a contact with Express Scripts, and pursuant to the terms of the contact, it withheld from Grabstald the “lower out-of-pocket amounts available to him for the same quantities of his prescribe medications that would be charged if he did not use [h]is Anthem prescription drug coverage for the transactions,” according to the lawsuit.

He alleges Walgreens uses its secret contracts with all other main PBMs to justify concealing such information from its hundreds of thousands of customers.

With approximately 8,175 stores throughout the U.S., Walgreens is one of the largest purchasers of prescription drugs and its annual pharmacy revenue sales reportedly reach nearly $84 billion.

Grabstald is suing on behalf of himself and others in three separate classes: a Racketeer Influenced and Corrupt Organizations Act subclass, an Employment and Retirement Income and Security Act subclass, and a California law subclass.

He wants a judge to declare that Walgreens knowingly engaged in malicious conduct to defraud him and subclass members, enjoin the company from engaging in fixed copays with its PBMs, and award restitution for damages to be determined at trial.

He is represented by Steve Berman of Hagens Berman Sobol Shapiro. The same firm also sued CVS on Monday.

“Customers like Plaintiff Grabstald have particular confidence in Walgreens to inform him about the copay amounts—and his potential savings from paying the cash price—because Walgreens promotes itself as being committed to being honest and candid with its customers,” the lawsuit states.

Walgreens spokesman Phil Caruso said in a statement, “The complaint lacks merit and we will vigorously defend against the allegations.”

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