Community pharmacies sue CMS to stop "preferred networks"

May 15, 2012

Four pharmacies have sued HHS and CMS to halt what they call a violation of federal Medicare Part D statute.

Preferential arrangements

The lawsuit was filed in the United States District Court for the Eastern District of North Carolina (Eastern Division). It charges that CMS wrongfully permitted Part D prescription drug benefit arrangements to create "preferred pharmacy networks."

The lawsuit seeks to prevent CMS from approving preferred networks that allow select pharmacies to attract Part D beneficiaries through economic incentives, including lower co-payments, while denying a broader base of competing pharmacies access to the same terms and conditions, resulting in their ultimate exclusion from the same network.

Plaintiff pharmacies include Farmville Discount Drug Inc., East Carolina Pharmacy Care Inc., Columbia Pharmacy Inc. and Todd's Pharmacy of Gates County Inc.

Competitive disadvantage

In summary, the plaintiffs contend that nothing in the Medicare Part D statute or its legislative history provides for the operation of prescription drug arrangements that allow a "preferred" pharmacy to offer one set of low co-pay and co-insurance rates to Part D beneficiaries while denying other non-preferred pharmacies the right to compete on a level playing field by offering the same terms and conditions.

Moreover, the plaintiffs argue in their federal complaint that the inclusion of some pharmacies and exclusion of all other pharmacies harms patients and places the excluded pharmacies at an economic competitive disadvantage.