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Wednesday, April 8, 2020

Pharmaceutical wholesale group says accreditation policy will ‘irreparably damage’ the nation’s prescription drug delivery system

By Jessica Karmasek | Nov 17, 2016


WASHINGTON (Legal Newsline) - A not-for-profit trade association that represents independently-owned pharmaceutical wholesalers is suing a pharmacy benefit manager and the federal government over a new accreditation policy, arguing it violates various state and federal laws.

The Association of Independent Pharmaceutical Wholesalers Inc., based in Pine Brook, N.J., filed its complaint in the U.S. District Court for the District of Columbia Nov. 4.

The named defendants include OptumRx Inc., based in Irvine, Calif.; the U.S. Department of Health and Human Services; Sylvia Burwell, secretary of the DHHS; the Centers for Medicare and Medicaid Services; and Andrew Slavitt, acting administrator of the CMS.

“Plaintiff brings this Complaint in response to OptumRx and the United States Government’s implementation of a policy requiring all of its participating network pharmacies to purchase medications only from a Verified-Accredited-Wholesale Distributor (‘VAWD’),” AIPW wrote in its 38-page complaint. “VAWD, however, is not sanctioned by HHS nor by its ‘sub-agencies’ such as CMS and the FDA, and its licensure is not a requirement imposed upon wholesale distributors by federal law.

“As detailed below, this policy will not only drive Plaintiff and their Members out of business, but will irreparably damage the United States’ prescription drug delivery system.”

AIPW contends the VAWD-accreditation policy is a “blatant” violation of the California Unfair Practices Act and similar laws in other states. Its implementation, the association argues, was done without proper notice and comment rulemaking, in violation of the federal Administrative Procedure Act.

The association filed the lawsuit on behalf of its members, who, along with similarly situated independent wholesalers, are part of what is called the “secondary wholesale market.”

The secondary wholesale market, as described in AIPW’s complaint, is comprised of smaller wholesalers that purchase the bulk of their medications and/or supplies from duly-licensed pharmacies and/or other duly-licensed wholesalers, then sell the medications and/or supplies to other pharmacies.

The wholesale drug market, on the other hand, is made up of predominantly three large players, according to the complaint. They include AmerisourceBergen Corporation, Cardinal Health Inc. and McKesson Corporation. “The Big Three,” as they are sometimes referred to, obtain their medications and/or supplies primarily from drug or device manufacturers.

OptumRx, a pharmacy benefit manager, or PBM, is essentially a third-party contractor tasked with administering the prescription drug benefit plans of insurance carriers and Medicare Part D plan sponsors.

“OptumRx contracts with a network of retail, mail order and specialty pharmacies to provide and dispense covered prescription services to OptumRx’s members,” AIPW explained in its complaint. “OptumRx regulates the participating pharmacies’ behavior and performance in the network through various contractual documents, including a Pharmacy Network Agreement, a Provider Manual, and numerous informal provider communications and Network Updates.

“Participating pharmacies must accept these terms and conditions to participate in OptumRx’s networks, otherwise they would not be entitled to receive reimbursement for prescriptions dispensed to OptumRx’s patients.”

The association claims a series of partnerships and agreements throughout the insurance/PBM/wholesale industry has resulted in OptumRx “aligning its interests” with the Big Three.

“OptumRx’s business relationships with the Big Three have resulted in the implementation of bad faith policies designed to steer market share away from the Secondary Wholesale Market and toward the Big Three,” AIPW alleges.

For instance, AIPW claims OptumRx, in August, informed its participating pharmacies that effective Oct. 1, participating pharmacies were required to purchase all medications being dispensed to OptumRx members from a VAWD.

VAWD, an accreditation offered by the National Association Boards of Pharmacy, essentially eliminates the secondary wholesale market, AIPW argues.

“Plaintiff’s members have already been informed by their pharmacy customers that the pharmacies will cease ordering medications and supplies from Plaintiff’s members due to OptumRx’s VAWD-Accreditation Policy,” the association alleges. “This is because the pharmacy customers face PBM audits from OptumRx, whereby OptumRx actively threatens to ‘recoup’ 100 percent of funds paid to the pharmacy arising from the purchase of drugs from wholesalers such as Plaintiff’s members that are not VAWD accredited.”

In its complaint, AIPW argues that OptumRx is an agent of the federal government in their administration of Medicare Part D.

“As a result, a formal rule making by HHS or CMS is required for the VAWD-Accreditation Policy established by OptumRx to be effective as against ‘Downstream Entities’ -- such as Plaintiff’s members and their customers -- who ‘furnish’ Medicare ‘services or benefits’ to Medicare enrollees,” the association wrote.

“HHS, Burwell, CMS, and Slavitt (collectively ‘HHS Defendants’) however, have adopted the VAWD-Accreditation Policy without notice and comment rulemaking by way of their agent, OptumRx’s implementation of the VAWD-Accreditation policy.”

Washington, D.C, law firm Cohen Mohr LLP and New Jersey firm Frier & Levitt LLC are representing AIPW in the lawsuit.

A DHHS spokesman declined to comment on the lawsuit, saying the U.S. Department of Justice would be representing the agency in the case. The DOJ declined to comment on the pending litigation.

Judge Ketanji Brown Jackson has been assigned to the case, according to the docket.

From Legal Newsline: Reach Jessica Karmasek by email at

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U.S. Department of Health and Human ServicesU.S. Department of Justice