The National Community Pharmacists Association (NCPA) hailed a decision made by a federal judge in Arizona regarding CVS Health’s insistence that an arbitrator decide whether the claims made by several independent pharmacies be sent to arbitration.
In a Nov. 15 press release, NCPA commented on the decision by Judge John J. Tuchi in United States District Court for the District of Arizona. Tuchi ruled that “a court, and not an arbitrator, should decide whether a plaintiff’s claims against the company must be sent to arbitration,” the NCPA said in its announcement.
The case, Osterhaus Pharmacy Inc. vs. CVS Health Corp., “challenged a provision in its contract with CVS purporting to say all disputes must be decided by an arbitrator,” the NCPA said. “CVS argued that even the question of what can be arbitrated has to be arbitrated. Tuchi agreed with Osterhaus that, given the many unfair barriers erected by CVS, even delegating the decision on what has to be arbitrated is unconscionable.”
Lawsuit calls out DIR fees
The Osterhaus Pharmacy suit, filed in September 2023 by NCPA member Matt Osterhaus, challenges the direct and indirect remuneration (DIR) fees demanded by Caremark, CVS’s pharmacy benefit manager (PBM). As background in the decision, Tuchi noted the plaintiff’s position: “Because Caremark controls access to such a large portion of the country’s Part D beneficiaries, independent pharmacies have no choice but to accept Caremark’s terms of doing business, however unfair or onerous they may be.
“The FAC [first amended complaint] alleges that Caremark has engaged in monopolistic behavior by way of an anticompetitive fee structure known as ‘direct and indirect remuneration’ (DIR). Under the applicable Medicare rules and regulations, the drug price presented to the patient at the point of sale must reflect all negotiated price concessions. However, in 2016, the federal Centers for Medicare & Medicaid Services (CMS) exempted a narrow class of price concessions from the general rule that all such concessions must be determined at the point of sale. The exempted fees are ‘those contingent price concessions that cannot reasonably be determined at the point-of-sale.’ The FAC alleges that Caremark has abused this provision by illegitimately extracting millions of dollars from independent
pharmacies.”
“Caremark and the other PBMs stack the decks in their arbitration proceedings to avoid accountability for illegal acts,” said Matt Seiler, NCPA general counsel. “The ‘day in court’ they offer pharmacies costs more and takes away important rights that pharmacies would have if they could proceed in court. We are glad that the court recognized how Caremark’s forced arbitration clause is ‘substantively unconscionable.’ The arbitration process also keeps these cases secret. That allows Caremark and the other PBMs to continue to treat pharmacies unfairly and illegally extract junk fees. We are hoping this lawsuit helps to bring these unlawful practices into public view.”
In his ruling, Tuchi said, “The Court, not an arbitrator, is the arbiter of whether plaintiffs’ claims are arbitrable. … It is therefore ordered denying in part defendants’ motions to compel arbitration.”
“It’s payback time,” NCPA CEO B. Douglas Hoey said when the Osterhaus case was filed. “Finally, community pharmacies have a chance to recover DIR fees that were unfairly taken. PBMs have been gaming the system for a long time, and it’s time to turn the tables.”
