By lowering net reimbursement to independent pharmacies, the PBMs were also able to put many such pharmacies out of business, thereby reducing their market competition.
On April 28, 2025, the Michigan Attorney General's Office filed suit against Express Scripts Inc. (ESI) and Prime Therapeutics LLC, two of the nation's largest pharmacy benefits managers (PBMs), alleging that they conspired to suppress reimbursements to independent pharmacies and to eliminate competition. The 89-page complaint details the decline of independent pharmacies in Michigan and across the United States and alleges that ESI and Prime's arrangement contributed significantly to that decline. According to the complaint, their conduct harmed Michigan residents by decreasing healthcare access, increasing healthcare costs and decreasing the number of small businesses in Michigan. This is the latest in a series of lawsuits alleging collusion by the nation's major PBMs and continues a nationwide trend of increased scrutiny of PBM conduct.
According to the complaint, in December 2019, ESI gave Prime confidential information on the rates it pays independent pharmacies (allegedly lower than Prime's at the time) and the fees it charges pharmacies per fill (allegedly higher than Prime's). In exchange, Prime agreed to pay those same rates, charge those same fees and pay ESI a fee every time it did so. This arrangement gave ESI price control over Prime's 30 million beneficiaries, thereby de facto adding them to its existing population of 75 million beneficiaries.
By lowering net reimbursement to independent pharmacies, the PBMs were also able to put many such pharmacies out of business, thereby reducing their market competition. According to the complaint, the rates ESI and Prime pay independent pharmacies under the arrangement are less than the pharmacies' acquisition costs for drugs. Pharmacies were forced to either accept these losses or else lose access to the ESI/Prime network of 105 million patients nationwide. But these losses, combined with the post-point-of-sale fees ESI and Prime charge under the arrangement, allegedly made it impossible for many pharmacies to remain profitable. Nationwide, approximately one independent pharmacy has closed every day since 2023; in Michigan, 233 of the state's 1,026 independent pharmacies closed between 2020 and December 2023, and another 91 closed between then and August 2024.
Allegedly, the arrangement benefited ESI especially well in Michigan. Nationwide, ESI accounts for 23 percent of PBM services, making it the nation's second-largest PBM by market share. In Michigan, however, since 2021—one year after the alleged arrangement went into effect—ESI has accounted for 89 percent of PBM services.
According to a 2021 interview with Prime's then-president and CEO cited by the complaint, this arrangement was Prime's idea. Prime approached each of the nation's three largest PBMs (CVS Caremark, OptumRx Inc. and ESI) and offered them Prime's beneficiaries in exchange for access to those PBMs' networks. ESI took the offer.
The complaint alleges various forms of additional anticompetitive conduct, including patient steering and excluding independent pharmacies from their network. Specifically, the complaint alleges that:
- ESI and Prime used various means to force patients to use their affiliated pharmacies rather than independent pharmacies. Both PBMs created "preferred pharmacy networks"—consisting of affiliated pharmacies—that offer patients lower cost-sharing or out-of-pocket fees than do independent pharmacies.
- Both PBMs place caps on the number of refills a patient may fill at nonaffiliated pharmacies.
- Both PBMs adjust their formularies to designate numerous high-cost prescription medications as specialty drugs, then require beneficiaries to obtain those specialty drugs from affiliated pharmacies.
- Allegedly, the use of specialty designations has been especially profitable for ESI and Prime, as it allows them to steer both patients as well as the most-profitable drugs to affiliated pharmacies.
- Both ESI and Prime often remove participating pharmacies from their network by sending unprompted termination notices. These notices provide no explanation other than a citation to a provision in their network agreement that allows the PBM to terminate a pharmacy for any reason.
- To prevent nonparticipating pharmacies from entering the network, ESI and Prime subject such pharmacies to long waiting periods for network admission or require prohibitively high bonds. In Michigan, for example, ESI allegedly requires any prospective pharmacy to furnish a performance bond of $500,000 (more than 10 percent of the annual gross revenue of the average independent pharmacy) and requires them to maintain that bond for at least two years. The result is that many independent pharmacies end up excluded from the combined ESI/Prime network. And given the size of ESI and Prime's network—especially in Michigan—exclusion likely means going out of business.
The complaint alleges that the above conduct has harmed Michigan residents by decreasing healthcare access, increasing healthcare costs and decreasing the number of small businesses in Michigan. Accordingly, it brings causes of action for agreement in restraint of trade (under federal and state law), public nuisance and unjust enrichment.
This suit follows years of ongoing and increasing nationwide scrutiny of PBMs. The FTC has been investigating the nation's six largest PBMs (including ESI and Prime) over alleged anticompetitive conduct for several years. In September 2024, the FTC filed a price-fixing lawsuit analogous to this one against CVS Caremark, OptumRx Inc. and ESI—and last year, several state attorneys general (including Michigan's) filed suits alleging collusion among PBMs and drug manufacturers that fueled the opioid crisis.
Though this lawsuit is specific to Michigan, the conduct it alleges is nationwide. Therefore, its results could affect PBM activity throughout the country. Duane Morris' Pharmacy Litigation Group will be closely monitoring these developments.
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If you have any questions about this Alert, please contact Jonathan L. Swichar, Bradley A. Wasser, Taylor Hertzler, any of the attorneys in our Pharmacy Litigation Group or the attorney in the firm with whom you are regularly in contact.
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