What are PBMs?
Pharmacy Benefit Managers (PBMs) are intermediaries in healthcare, handling prescription drug programs to bargain for better prices. They team up with insurers, Medicare Part D plans, employers, and payers to boost efficiency and cost savings. PBMs also manage formularies, pharmacy contracts, and drug claims, influencing drug pricing and access in healthcare.
A PBM fraud becomes a qui tam action when an individual, often referred to as a whistleblower or “relator,” identifies fraudulent activities against government health programs, such as Medicare or Medicaid, and decides to file a lawsuit on the government’s behalf. The False Claims Act (FCA) empowers private citizens to sue entities that are defrauding the government and to share in any recovered damages.
Types of PBM Fraud
SPREAD PRICING MANIPULATION
This happens when PBMs charge health plans much more than what they pay pharmacies for meds, keeping the extra cash for themselves.
KICKBACKS AND REBATE SCHEMES
Illegal financial incentives could be given or taken in exchange for formulary placement or switching prescription drugs, jeopardizing patient care for the sake of profit.
FALSE CLAIMS AND INFLATION OF DRUG PRICES
Submitting claims for drugs at higher prices than what was actually provided or tweaking prices to boost reimbursement rates.
UNAUTHORIZED SUBSTITUTE OF MEDICATIONS
Changing a patient’s prescribed medication to another drug without appropriate authorization is frequently motivated by profitability rather than the patient’s health requirements.
FAILURE TO MEET CONTRACTUAL OBLIGATIONS
Not delivering the promised services or neglecting to pass on the agreed savings to clients and patients, going against the terms of the contract.
These illegal activities not only mess with healthcare’s integrity but also drive up costs for patients and payers, showing how important whistleblowers are in exposing these practices.
Common PBM Practices and Concerns
PBMs employ various practices to manage prescription drug benefits, including:
FORMULARY MANAGEMENT
PBMs decide which drugs are covered and at what tier, influencing medication choices and costs.
PHARMACY NETWORK CONTRACTS
PBMs contract with pharmacies to create networks that provide prescription services to their members.
REBATE NEGOTIATIONS
PBMs negotiate rebates with drug manufacturers in exchange for favorable formulary placement.
While these practices can help manage costs, they also raise concerns about transparency, conflicts of interest, and the potential for PBMs to prioritize their own profits over patient care and cost-effectiveness.
What are the main functions of PBMS in the Pharma Industry?
PBMs create and manage prescription drug plans, which cover things like formulary management (list of drugs covered), drug utilization review, and medication therapy management.
NEGOTIATING DRUG PRICES
PBMs work with drug manufacturers, pharmacies, and wholesalers to get discounts, rebates, and price deals on prescription drugs. These negotiated discounts impact how much health plans and patients pay for medications.
CLAIMS PROCESSING
Pharmacy Benefit Managers (PBMs) handle prescription drug claims from pharmacies and manage reimbursements to pharmacies for health plans or employers.
PHARMACY NETWORK MANAGEMENT
PBMs handle networks of pharmacies where plan members can get their meds. They work out contracts, set rates, and keep an eye on pharmacy performance.
PBMs have been under scrutiny for their contribution to the increase in drug costs, lack of clarity in pricing methods, and possible conflicts of interest arising from their engagement in different parts of the pharmaceutical supply chain.
Whistleblower Protections
Whistleblowers who expose fraud involving PBMs are protected under laws such as the False Claims Act. These laws allow individuals to bring lawsuits on behalf of the government and potentially receive a portion of any recovered funds. Whistleblowers are also protected from retaliation by their employers.
How to Document PBM Fraud
Essential Tips for Preparing Your Whistleblower Case
Maintain comprehensive records of all relevant communications, transactions, and activities related to the suspected fraud. This includes emails, memos, contracts, billing statements, and any other documentation that could provide evidence of fraudulent practices.
ORGANIZE YOUR DOCUMENTATION
Arrange your documents in a logical order, such as chronologically or by category. This will make it easier to reference specific pieces of evidence and present a coherent narrative of the fraud.
TAKE NOTES
As you observe potential fraudulent activities, take detailed notes of your observations, including dates, times, and the individuals involved. Be as specific as possible, and avoid making subjective judgments or assumptions.
IDENTIFY KEY PLAYERS
Make a list of individuals who are directly or indirectly involved in the suspected fraud, including their roles and responsibilities. This can help investigators understand the structure of the fraudulent scheme and identify potential witnesses.
HIGHLIGHT IRREGULARITIES
Pay attention to any discrepancies or irregularities in billing practices, pricing, or drug utilization patterns. These can be important indicators of fraud, especially if they deviate significantly from standard industry practices.
PRESERVE DIGITAL EVIDENCE
If you have access to electronic data or systems that contain evidence of fraud, ensure that this information is preserved securely. Avoid altering or deleting any files, as this could compromise the integrity of the evidence.
UNDERSTAND LEGAL PROTECTIONS
Familiarize yourself with the legal protections available to whistleblowers, including anti-retaliation measures. This can help you navigate the process of reporting fraud while safeguarding your rights and interests.
SEEK LEGAL ADVICE
Consult with a whistleblower attorney who has experience in PBM fraud cases. They can provide guidance on how to document the fraud effectively, protect your legal rights, and navigate the complexities of whistleblower litigation.
MAINTAIN CONFIDENTIALITY
Keep your documentation and suspicions confidential until you have consulted with an attorney. Public disclosure of the fraud before filing a whistleblower lawsuit could jeopardize your ability to pursue a claim under certain laws.
By following these tips, you can create a well-documented case that provides a strong foundation for legal action against PBM fraud.
PBM FAQS
A Pharmacy Benefit Manager (PBM) is a company that handles drug benefits for health insurance.
PBMs generate revenue through several channels such as service fees, spread pricing, manufacturer rebates, and additional strategies.
Spread pricing is a practice employed by some Pharmacy Benefit Managers (PBMs) where the PBM charges the health insurance plan a higher amount for a prescription drug than what they pay the pharmacy for dispensing that drug. The PBM then keeps the difference, or “spread,” as profit. This can lead to situations where the actual cost of the drug to the pharmacy and the amount charged to the insurer are significantly different, raising concerns about transparency and the overall impact on healthcare costs.
Laws such as the False Claims Act safeguard whistleblowers, offering them legal remedies against retaliation and a portion of any financial restitution.
PBMs are companies that manage prescription drug benefits for health insurance plans. They negotiate drug prices with manufacturers, create formularies (lists of covered drugs), and process prescription claims. Their goal is to control drug costs and ensure patients have access to necessary medications.
Fraud by PBMs can occur in various ways, including overcharging government programs for prescription drugs, engaging in kickback schemes with drug manufacturers, manipulating formularies for financial gain, and billing for medications not actually dispensed.
Red flags for PBM fraud might include sudden changes in drug pricing or formulary placement without clear clinical justification, discrepancies between the prices charged to government programs and those offered to other customers, and unusual patterns in prescription refill rates or drug utilization.
Reporting PBM fraud helps protect public funds, ensures fair pricing for prescription drugs, and maintains the integrity of healthcare programs. It can also lead to reforms in PBM practices, contributing to a more transparent and equitable healthcare system.
If you suspect PBM fraud, it’s important to document your observations and gather any evidence you have. You should then consult with a whistleblower attorney who has experience with healthcare fraud cases to discuss your options and the best course of action.
While you can report fraud anonymously, filing a whistleblower lawsuit under the False Claims Act requires you to disclose your identity to the government. Your identity may be kept confidential during the investigation, but it could be revealed if the case goes to court.
Whistleblowers may face risks such as retaliation from their employer, including termination, harassment, or demotion. However, there are legal protections in place, including anti-retaliation provisions under the False Claims Act, to safeguard whistleblowers’ rights.
The duration of a whistleblower case can vary widely, from several months to several years, depending on the complexity of the case, the extent of the investigation required, and the legal proceedings involved.
PBM Reform Organizations
Coalition for PBM Reform
Coalition for PBM Reform works toward a shared goal of preserving patient access to affordable medication and protecting the doctor-patient relationship in all communities across the nation. Includes patient advocacy organizations, prescriber organizations, pharmacy organizations (including chain, independent community, grocery, specialty, and other retail pharmacies) employer-sponsored health groups, business organizations, and other stakeholders.
The PBM Accountability Project
The PBM Accountability Project unites healthcare, labor, business, pharmacy, and consumer patient advocacy leaders to prevent patients in private and public health plans from overpaying for essential prescription medicines. Their goal is to inform the public and promote initiatives that redirect prescription drug savings from excessive PBM profits back to patients, employee health plans, and taxpayers.
PBM Accountability Project of Colorado
PBM Accountability Project of Florida
PBM Accountability Project of Minnesota
PBM Accountability Project of New Hampshire
PBM Accountability Project of Ohio
Pharmacists United for Truth and Transparency (PUTT)
PUTT is a grassroots coalition of pharmacists and pharmacy owners dedicated to exposing the negative impacts of PBMs on patients, pharmacies, and the healthcare system. They advocate legislative changes and provide resources for pharmacists to fight against PBM abuses.
Pharmacy Benefit Management Institute (PBMI)
The Pharmacy Benefit Management Institute is the industry’s sole membership organization solely dedicated to aiding healthcare buyers in maximizing the value of their drug benefit plans. Since 1995, PBMI has supplied valuable research, education, web resources, and a forum to promote best practices and propel marketplace changes that enhance pharmacy benefits and manage costs.
Organizations that support PBM Reform
Alliance for Transparent & Affordable Prescriptions (ATAP)
ATAP is a coalition of provider and patient organizations working to promote transparency and affordability in prescription medications. They advocate regulatory and legislative action to reform PBM practices.
American Pharmacists Association (APhA)
The American Pharmacists Association (APhA) is the oldest professional society of pharmacists in the U.S., supporting pharmacists, student pharmacists, and pharmacy technicians in improving medication use and patient health outcomes. They endorsed the Pharmacy Benefit Manager Transparency Act of 2023.
Community Oncology Alliance (COA)
COA protects access to quality, affordable cancer care. They have been critical of PBM practices that restrict oncology drug access and inflate costs. COA advocates for policy changes to limit PBM power and promote patient access.
The Food Industry Association
The Food Industry Association (FMI) backs PBM reform, pushing for transparency, competition, and affordability in the drug supply chain. Recent legislative efforts against anticompetitive PBM practices are welcomed by FMI, stressing the need for reform to enhance pharmacy access and choice. FMI also works with industry groups via the Coalition for PBM Reform to boost transparency in PBM practices.
Independent Pharmacy Cooperative (IPC)
IPC is a member-owned cooperative of independent pharmacies. They advocate legislative and regulatory changes to address the inequities and lack of transparency in PBM practices.
National Association of Chain Drug Stores
The National Association of Chain Drug Stores (NACDS) represents pharmacies in various retail settings. NACDS works for PBM reform, aiming for transparency and accountability to lower drug costs and protect pharmacies and patients. They back legislation against anti-competitive practices for fair industry standards.
National Association of Specialty Pharmacies
NASP represents specialty pharmacies and has been active in highlighting the impact of PBMs on specialty medication access and pricing. They support reforms to improve transparency and fairness in PBM operations.
National Community Pharmacists Association (NCPA)
NCPA represents the interests of community pharmacists and has been vocal in advocating for PBM reform. They push for transparency in PBM practices and legislation that curtails PBM influence on drug pricing and pharmacy reimbursement.
Patients for Affordable Drugs
Patients for Affordable Drugs advocate for increased transparency and accountability in the practices of pharmacy benefit managers to ensure that patients benefit from lower drug prices.
Patients for Affordable Drugs Now (P4ADNOW)
P4ADNOW advocates for lowering drug prices and supports PBM reform to ensure that savings are passed on to patients rather than retained by PBMs. They push for legislative changes to curb anti-competitive practices by PBMs