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Express Scripts Is Accused of Fraud

August 05, 2004|From Reuters

Pharmacy benefits manager Express Scripts Inc. inflated prescription drug prices by millions of dollars, enriching itself at the expense of New York state, according to a lawsuit filed Wednesday by New York Atty. Gen. Eliot Spitzer.

Spitzer, who has been investigating the company for a year, said the abuses had occurred over a five-year period and had cost the state $100 million.

Express Scripts denied the allegations and said it would defend itself in court. Its shares slumped as much as 5.5% during the day's trading, and shares of rival pharmacy benefits manager Caremark Rx Inc. also fell.

The suit alleges that the company inflated the cost of generic drugs at the expense of New York state's largest employee health plan, Empire Plan. It accuses the company of cheating the state on payments from drug companies that Express Scripts received when negotiating on behalf of New York.

"They are using their role as an intermediary to line their own pockets," Spitzer told reporters during a conference call. "They were simply committing fraud, and it cuts to the core of the integrity of the company."

Spitzer said abusive practices were rampant throughout the sector. Pharmacy benefits managers, or PBMs, act as middlemen, buying drugs for employers and health plans.

Spitzer said the state would have preferred to settle the matter out of court, but talks with Express Scripts broke down.

"We are clearly far apart in the valuation of the harm done to New York," he said.

Express Scripts, based in Maryland Heights, Mo., said it had saved New York $2 billion in drug costs since 1998.

PBMs deal directly with drug companies and have been under scrutiny for several years because of their ties to manufacturers and the discounts they receive.

Express Scripts shares fell $1.37 to $62.48 on Nasdaq, while Caremark lost $1.06 to $29.21 on the New York Stock Exchange.

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