FTC, DOJ and HHS Extend RFI on Private Equity Control in Health Care Markets

The Federal Trade Commission, the Department of Justice’s (DOJ) Antitrust Division, and the U.S. Department of Health and Human Services (HHS) are extending the deadline by 30 days for the public to comment on a tri-agency Request for Information (RFI) examining private-equity and other corporations’ increasing control over health care markets. The new deadline is now June 5, 2024.

At Lanton Law not only do we understand the issues, but we provide you with timely solutions to help you make informed decisions about either an acquisition target or ways to maximize value. We counsel clients by performing corporate due diligence, provide strategic advice for growth and business strategies as well as structuring and executing M&A transactions.

Contact us today to learn more

How to Choose a Lobbyist

Since the early 2000s, there has been a steady increase in the amount of government activity that has directly affected healthcare stakeholders. Prior to this time-period, companies could afford to focus only on differentiating their products from their competitors. Now companies are finding that during their strategic planning meetings, they must account for how state and federal government activity may impact their bottom line. In addition to having a Government Affairs staff, these same companies are starting to realize the importance of having established a relationship with a lobbyist. The question is how do you find the right lobbyist for your organization? 

First you want to make sure the lobbyist has experience. To be a good lobbyist there is no magic number of how many years you have worked within the political system. However; many lobbyists have worked an average of six months in the legislature as an aide to a legislator or on the other side of the spectrum, many legislators have left the legislature to work as a lobbyist. These individuals have an insider’s perspective into how the legislature works such as when a bill filing deadline date is and whether or not a bill can be introduced due to if a state is in an emergency session where the rules for introducing legislation is different from regular session. 

Second the lobbyist should have a minimum number of contacts in the legislature. Whether it is in Congress or on the state level, the lobbyist should be able to have a go to legislator that can get a bill introduced quickly. However; the most successful lobbyist will not be limited to one party. Having contacts on both sides of the aisle will allow the lobbyist the opportunity to bring any bill at any time regardless of what political party has the majority.   

Third the best lobbyist should be strategic. He or she should be able to know when a good time to introduce legislation is. The lobbyist should know what legislator to target as the bill sponsor. This is important because the bill sponsor will be the champion for your particular bill from start to finish. The lobbyist will need to educate the bill sponsor on the nuances of the bill so that the sponsor will be educated enough to be able to respond to technical questions during a hearing or when the sponsor is in caucus meetings; explaining to their respective party about why your bill should be voted on. The lobbyists should be able to pick and choose what committee will be best for your bill to go into, who to use as strategic allies for your legislation and be intuitive enough on when to negotiate and when not to.   

Next it is important for your lobbyist to know the industry and to have foresight. You need to be comfortable knowing that your lobbyist understands your industry because if not, how can you be sure that your lobbyist is communicating the correct outcome for you? The lobbyist should be skilled enough to draft a bill that solves your problem without having to continuously ask you how something works. Additionally, while many lobbyists only focus on the legislature, the best lobbyists will think long-term to determine if a regulatory body will be involved once your bill passes. If so a lobbyist should be able to guide you through the regulatory process without leaving you to fend for yourself after a bill has passed. 

Finally, as with any other professional, you need to be aware of the reputation your lobbyist has. Do they take the time to make sure their clients understand everything that is happening? Does the lobbyist prepare the client and relevant legislators ahead of time for crucial hearings? Does the lobbyist make everything easy to understand? Does the lobbyist dress appropriately for meetings and do they have the needed respect from the legislature? Does the lobbyist closely follow the bill from start to finish or are they overloaded with too many clients? These are important issues to talk with your prospective lobbyist about before entering into a contractual relationship. 

While there are other nuances to the lobbying relationship, these should be enough for you to think about as your organization considers whether to engage a lobbyist. Lobbyist should no longer be considered a luxury item. The best lobbyist are quickly becoming essential parts of today’s corporate environment for the value they bring to their clients in either advancing their interests through legislation, or being available to respond to legislative targeting that has been on the rise. You know you have picked the right lobbyist when you can breathe a sigh of relief knowing that they have your back.  

Lanton Law is a national boutique law and government affairs firm that closely monitors legislative, regulatory and legal developments for our clients. We help stakeholders understand what’s at issue so that we can help our valued clients achieve their priorities. Contact us to learn about how either our legal or lobbying services can help you attain your goals.

New Proposed Congressional DIR Relief Bill

At Lanton Law we are constantly on the watch for issues impacting our specialty, retail and LTC pharmacy clients including the issue of DIR fees. Clients utilize our advocacy and legal tools while discussing business strategy to combat an ever changing reimbursement environment. 

A bipartisan group of Congressional legislators  have introduced the Pharmacy DIR Reform to Reduce Senior Drug Costs Act, also known as S. 1909/H.R. 3554. Both companion bills propose to transfer all pharmacy DIR to the point of sale. As many in the industry know, DIR fees were intended to be applied here but the definition and application of DIR fees have been so convoluted that they are causing deep and long lasting damage to the pharmacy community. 

Lanton Law is a national boutique law and lobbying firm that focuses on healthcare/life science and technology. Our pharmacy practice has been helping pharmacies nationwide with operational issues, mergers and acquisitions, regulatory inquiries, audits, licensure, employment issues and contracting. Our lobbying section helps pharmacies nationwide achieve improved business climates through carefully crafted legislation.   

If you are an industry stakeholder with questions about the current landscape or if you would like to discuss how your organization’s strategic initiatives might be impacted by either Congress, regulatory agencies or legal decisions, contact us today.

PBM Lobby Has 8th Circuit Win Vacated & Remanded

The U.S. Supreme Court ruled in a February 22, 2021 decision against the Pharmaceutical Care Management Association (PCMA); the Washington D.C. based trade group that represents pharmacy benefit managers (PBMs). 

The Court described the merits of Dirk Wilke, Interim State Health Officer of North Dakota, et al., Petitioners v. Pharmaceutical Care Management Association below:

In Rutledge v. Pharmaceutical Care Management Association, No. 18-540 (U.S.), this Court granted a writ of certiorari to decide whether the Employee Re- tirement Income Security Act of 1974 preempts an Arkansas law that regulates the rates that pharmacy benefit managers (PBMs) reimburse pharmacies for dispensing generic drugs. In that case, the Eighth Circuit had held that Arkansas’s law made a prohib- ited “reference to” ERISA plans and had a forbidden “connection with” such plans.

In this case, Respondent sought to enjoin two North Dakota laws that regulate, among other things, certain fees that PBMs charge pharmacies, which drugs pharmacists are allowed to dispense, and what pharmacists are allowed to say to their pa- tients. These laws apply the same standards regard- less of whether PBMs are providing services to an ERISA or non-ERISA plan.

In ruling in Respondent’s favor, the Eighth Cir- cuit applied its decision in Rutledge to do two things. First, it held that, under Rutledge’s logic, North Da- kota’s laws make an impermissible “reference to” ERISA plans because they apply to PBMs serving plans that “include[]” ERISA plans. Second, the court held that a finding of preemption under ERISA nullifies a State law “in its entirety”—even as ap- plied to non-ERISA plans. Because of the first hold- ing, the Eighth Circuit elected not to decide whether North Dakota’s laws also had a forbidden “connection with” ERISA plans. And because of the second hold- ing, the Eighth Circuit stated that it did not reach Respondent’s separate claims of preemption under Medicare Part D.

The questions in this case are: 1) Whether, contrary to decisions of this Court and every other court of appeals that has addressed the issue, ERISA preempts a State law simply be- cause it is broad enough to “include[ ]” ERISA plans among those affected by the law; 2) Whether, contrary to the text of ERISA and deci- sions of this Court and every other court of ap- peals to consider the issue, ERISA preempts a State law “in its entirety”—even as that law ap- plies to non-ERISA plans.

The Court granted the petition then vacated the prior Court’s decision and remanded the case for further consideration in light of Rutledge v. Pharmaceutical Care Management Assn. Rutledge was a December 2020 unanimous decision that ruled ERISA did not preempt Arkansas’ law on reimbursing pharmacies below acquisition costs, ruling that ERISA does not preempt rate regulations.  

Lanton Law was quoted by Law360’s article describing the Court’s Rutledge decision. 

Lanton Law is a national boutique law and government affairs firm that closely monitors and counsels clients on legislative, regulatory and legal developments in the LTC, specialty and retail pharmacy space. If you are in industry stakeholder with questions about strategy or simply need advice,contact us today.

Lanton Law quoted in Bloomberg Law Article

We were quoted in Bloomberg Law’s article titled “States Risk Losing Power to Regulate Pharmacy Drug Middlemen” by Lydia Wheeler. The article discusses the pros and cons of Rutledge v. PCMA, which is currently being debated at the Supreme Court.

For those that have trouble accessing the article we have provided it below.

States are going to have a hard time controlling the cost of prescription drugs if the Supreme Court broadens a federal law prohibiting states from regulating employee benefit plans.

A challenge to an Arkansas law meant to protect independent pharmacies from abusive reimbursement practices of rate-setting pharmacy middlemen is testing the bounds of the Employee Retirement Income Security Act. A decision striking down Arkansas’s law could cripple state efforts to control the cost of prescription drugs and other health-care services. That could lead to a flood of litigation challenging dozens of similar laws in other states, health policy experts say.

“This is really the tip of the iceberg because states are trying to control drug costs in all kinds of different ways,” said Katherine Gudiksen, a senior health policy researcher at the Source on Healthcare Price and Competition, a project of the University of California Hastings College of Law.

The case could be one of the first decided by the Supreme Court this term. Arguments were heard Oct. 6.

Drawing the Line 

Arkansas’s fighting to save its law, which regulates the rates at which pharmacy benefit managers reimburse pharmacies for drugs and gives pharmacies a right to appeal the rates they set.

The U.S. Court of Appeals for the Eighth Circuit held the law was preempted by ERISA, which prohibits states from passing laws that reference an ERISA plan or have an impermissible connection to an ERISA plan. But Arkansas argues pharmacy reimbursement regulation is basic rate regulation, which the Supreme Court has ruled isn’t preempted by ERISA.

“It’s hard to see how a law that directly affects benefits claims processing isn’t central to ERISA plan administration,” said Stacey Cerrone, a principal in the New Orleans office of Jackson Lewis PC.

“The court is struggling on where to draw the line with preemption,” she said.

Patchwork of State Laws

A win for Pharmaceutical Care Management Association (PCMA)—the trade group for PBMs that’s aggressively fighting this law and others—would likely open the door for more legal challenges. Laws regulating PBMs have passed in 36 states.

“There’s no agency that oversees federally a pharmacy benefit manager,” said Ron Lanton, principal at Lanton Law, which helped lobby for some state PBM laws. “That’s the problem, so the states have had to come up with their own solution on how to regulate this problem.”

But PCMA argues Congress set out to create a uniform set of standards in administering ERISA plans, which include most private sector health plans. The trade group said employers will have to spend more money on administrative services and compliance, increasing the cost of care, if laws like the one in Arkansas remain.

“More than 266 million Americans rely on the prescription drug benefits PBMs administer, and now more than ever we’re committed to protecting accessible, affordable health care,” JC Scott, PCMA’s president and CEO, said in a statement after oral arguments in October.

In addition to Arkansas, PCMA has challenged laws in North Dakota, Oklahoma, and Iowa in recent years.

The trade group has been successful in winning challenges in the Eighth Circuit. The appeals court ruled Iowa’s law and two North Dakota lawsare preempted by ERISA. Iowa’s law regulates how PBMs establish generic drug pricing, and requires certain disclosures on their drug pricing methodology. North Dakota’s laws regulate the fees PBMs can charge pharmacies. North Dakota officials have appealed the court’s decision to the Supreme Court.

In July, a federal judge blocked part of Oklahoma’s law. PCMA filed an appeal to the U.S. Court of Appeals for the Tenth Circuit, which it later had dismissed. The case is still playing out in the district court.

Lanton, who represents independent pharmacies, said his clients hope the Supreme Court provides some uniformity to what’s become a patchwork of state laws. He’s also hoping for a clear definition of what a pharmacy benefit manager is and isn’t.

“It comes down to this split in the court of whether or not the court sees a pharmacy benefit manager as an insurer that provides benefits or as an administrator that simply regulates reimbursement and cost.”

Market Power 

The three largest PBM companies are OptumRx, a subsidiary of UnitedHealth Group; CVS Caremark, a subsidiary of CVS Health; and Express Scripts, a subsidiary of Cigna Corp. They control 85% of the market share for PBM services, according to the National Association of Specialty Pharmacy’s brief in support of Arkansas.

That market power gives health plans very little bargaining power, said Erin Fuse Brown, director of the Center for Law, Health and Society at Georgia State University College of Law.

PBMs say they use their size and power to negotiate discounts with the pharmaceutical manufacturers, but it’s not clear they’re passing along those savings to the health plans, she said.

The case is Rutledge v. Pharm. Care Mgmt. Ass’n, U.S., No. 18-540.

To contact the reporter on this story: Lydia Wheeler in Washington at lwheeler@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Brent Bierman at bbierman@bloomberglaw.com

Amazon Launches U.S. Pharmacy Business

Many supply chain stakeholders have been fearing whether Amazon would ever open a retail pharmacy business. There have been traces of this occurring for years from its sporadic applications of pharmacy licenses in various states, to its June 2018 $753 million acquisition of PillPak. However; no coherent plan had come into focus until now. 

Today (November 17) Amazon has launched Amazon Pharmacy. According to the press release: 

“ Amazon.com, Inc. (NASDAQ: AMZN) today announced two new pharmacy offerings to help customers conveniently purchase their prescription medications. Amazon Pharmacy, a new store on Amazon, allows customers to complete an entire pharmacy transaction on their desktop or mobile device through the Amazon App. Using a secure pharmacy profile, customers can add their insurance information, manage prescriptions, and choose payment options before checking out. Prime members receive unlimited, free two-day delivery on orders from Amazon Pharmacy included with their membership. 

Also new today, Prime members can access savings on medications at Amazon Pharmacy when paying without insurance, as well as at over 50,000 other participating pharmacies nationwide. The Amazon Prime prescription savings benefit saves members up to 80% off generic and 40% off brand name medications when paying without insurance. Prime members will have access to their prescription savings at checkout on Amazon Pharmacy, or can learn more at amazon.com/primerx.

Together the Amazon Prime prescription savings benefit and Amazon Pharmacymake it simple for customers to compare prices and purchase medications for home delivery, all in one place. Now, filling prescriptions is as convenient as any other purchase on Amazon’s online store:

• Research Medications and Order Confidently: The same browsing experience customers are familiar with from Amazon makes it easy to discover what medications – including branded and generic versions, and different forms or dosages – are available through Amazon Pharmacy. Before checking out customers can compare their insurance co-pay, the price without insurance, or the available savings with the new Prime prescription savings benefit to choose their lowest price option.

• Seamless Transactions: Customers can add insurance information and ask their prescriber to send new or existing prescriptions directly to Amazon Pharmacy for fulfilment. Purchase is as simple as confirming the request on the Amazon App or website.

• Access Fully Digital, Personalized Quality Care: Customers have online self-service help options combined with phone access to customer care at any time. Friendly and knowledgeable pharmacists are available 24/7 to answer questions about medications.”

Notwithstanding today’s market moving news, we fully expect that our healthcare supply chain will continue to evolve. New players are moving into the sector and are looking for ways to either disrupt the model or have significant influence on reimbursement. To succeed you need to be in the know and planning ahead. 

Lanton Law is a national boutique law and government affairs firm that closely monitors legislative, regulatory and legal developments in the LTC, CBD/hemp, specialty and retail pharmacy space, as well as manufacturers and suppliers. If you are an industry stakeholder with questions about strategy or simply need advice, contact us today.    

Lanton Law & Private Equity

With increasing mergers and acquisitions in both the technology and healthcare sectors, investment opportunities abound for funds and interested stakeholders. In order for these stakeholders to be successful it is essential to know the limits and opportunities within a complex regulatory landscape. 

At Lanton Law not only do we understand the issues, but we provide you with timely solutions to help you make informed decisions about either an acquisition target or ways to maximize value. 

We counsel clients by performing corporate due diligence, provide strategic advice for growth and business strategies as well as structuring and executing M&A transactions.

If you are a financial stakeholder including a private equity firm, hedge fund, bank, etc. we have a suite of strategic services that can help. Contact us today to learn more.

New York Comptroller finds $605 million in unnecessary costs to the Medicaid program

The New York Comptroller recently released the results of an audit titled “Medicaid Program-Cost of Pharmacy Services Under Managed Care.” The audit covered the period January 1, 2016 to December 31, 2019.

The following outline the key findings of the audit;

• The Department missed opportunities to minimize costs on pharmacy services delivered through Medicaid managed care because Department officials did not take steps to ensure the use of the lowest net cost drugs to the Medicaid program. As a result, for the period January 1, 2016 through December 31, 2019, we estimated $605 million in unnecessary costs to the Medicaid program.

• The Department does not require MCOs to use the most cost-effective drugs to the Medicaid program, nor does it provide MCOs with information or assistance to determine the most cost-effective drugs.

• Medicaid-participating MCOs are required to regularly provide their drug formulary information, as well as information on costs and supplemental rebates (which MCOs did not always provide as required) for all drugs delivered under managed care, but the Department does not review this information to determine if MCO formulary preferences result in the use of the most cost-effective drugs.

The audit gave the following recommendation:

• Conduct timely routine analyses to identify the most cost-effective drugs to the Medicaid program and ensure drug utilization is steered toward drugs with the lowest net cost when medically appropriate.

If you are a healthcare stakeholder with an interest in New York state or do business within New York’s insurance system then you should be aware of this type of scrutiny. The legislature has already enacted a bill that will carve pharmacy benefits out of the Medicaid managed care program beginning in April 2021.

Lanton Law is a national boutique law and government affairs firm that focuses on healthcare and technology. If you are an industry stakeholder with questions about the current landscape or if you would like to discuss how your organization’s strategic initiatives might be impacted by either Congress, regulatory agencies or legal decisions, contact us today!

Lanton Law Newsletter is Out

We have released our August newsletter. This month we discuss our presentations at the National Association of Specialty Pharmacy, the new Executive Order aimed at PBMs, our recent Blogcast with Ken Kaitin, Professor and Director at the Tufts Center for the Study of Drug Development, the new LTC Congressional pharmacy bill and our interview with Pharmacy Times on Rutledge v. PCMA. Click here to view it.

Long Term Care Pharmacy (LTC) Legislation Introduced Aimed at Defining LTC Pharmacy

The Long-Term Care Pharmacy Definition Act of 2020 has been introduced by U.S. Senator Scott (R-SC) and co-sponsored by Senator Warner (D-VA). The bill has been introduced in the U.S. House of Representatives by Congressman Mullin (R-OK) and Congressman Schrader (D-OR). The bill seeks to establish a clear statutory definition of long term care pharmacy.

Lanton Law is a national boutique law and government affairs firm that closely monitors legislative, regulatory and legal developments in the LTC, specialty and retail pharmacy space. If you are in industry stakeholder with questions about strategy or simply need advice, contact us today.