David vs Goliath: PBM Tries to Force Independent Pharmacy into Arbitration

Over the past few months, Pharmacy Learning Network has been covering the story of Osterhaus Pharmacy, an independent pharmacy in Iowa, which sued UnitedHealth and its pharmacy benefit manager (PBM) OptumRx, and CVS and its PBM, Caremark, over what it calls ‘unconscionable’ direct remuneration fees (DIR) charged by PBMs. The lawsuit alleges a violation of federal antitrust law in that the PBMs deny access to their Medicare Part D beneficiaries’ network unless the pharmacies pay the DIR fees.

Caremark has since filed a motion to compel Osterhaus to submit to arbitration rather than a trial. To support the PBM’s argument, it points to the Caremark Provider Manual, which contains a mandatory arbitration clause compelling arbitration for all disputes between the provider and Caremark, including those arising from the Provider Manual. Osterhaus has opposed this motion, arguing that the mandatory arbitration provision is unconscionable. Osterhaus pointed out that Caremark’s contracts were written by Caremark alone and could not be negotiated. “Independent pharmacies such as Osterhaus Pharmacy must accept the terms in Caremark’s contracts,” notes Osterhaus’ reply brief. The Osterhaus brief argues that Caremark’s Provider Manual imposed unfair, one-sided rules, making it difficult for pharmacies (especially small ones) to seek compensation. One such rule requires any party to initiate arbitration to put at least $50,000 in escrow. Failure to do so is considered a breach of the arbitration clause.

The National Community Pharmacy Association (NCPA) recently launched a company to help independent pharmacies pursue legal action against PBMs and issued a statement blasting Caremark’s move to compel arbitration. “The barrier to entry and the one-sided arbitration rules are obscene,” said NCPA CEO B. Douglas Hoey in a statement. “It’s clearly designed to discourage small pharmacies from filing any complaints.” Hoey pointed out other one-sided provisions in the arbitration rules, including a limit on the award arbitrators can order Caremark to pay, limiting documents and data pharmacies can seek in the discovery process, and requiring the pharmacies to pay Caremark’s legal expenses if the pharmacy doesn’t win. “In order to serve their own patients, small pharmacies must accept all these unfair, one-sided contract provisions,” said Hoey, who noted that pharmacies have no alternative but to accept the terms. A Federal District Court will decide whether Osterhaus must comply with the arbitration clause.

References

NCPA blasts CVS Caremark move to short-circuit class action case. News release. NCPA. Published February 6, 2024. Accessed March 21, 2024. https://ncpa.org/newsroom/news-releases/2024/02/06/ncpa-blasts-cvs-caremark-move-short-circuit-class-action-case

Osterhaus Pharmacy, Inc. v UnitedHealth Group Inc; Optum, Inc.; OptumRX, Inc.; OptumRx Holdings, LLC. 2:23 US 1-32.