Updates on Corporate Practice of Medicine, PBM, and Non-Compete Litigation
No Decision in AAEM-PG v. Envision Case: A Potential Precedent-Setting Corporate Practice of Medicine and Private Equity Case is Avoided
A decision in the long-anticipated case, the American Academy of Emergency Medicine Physician Group (AAEM-PG) v. Envision Healthcare, will not come to pass, as Envision, a private equity-backed emergency physician staffing company, choose to exit the California market. In a press release, AAEM-PG stated a concern about whether a California court could retain jurisdiction over the case after Envision exited, and noted that a confidential settlement had been made. Experts, including The Source staff, had been watching the case as a potential precedent-setting example of how Unfair Competition Law and the Corporate Practice of Medicine Doctrine could be used to counteract some of the impacts of private equity influence in medicine. Many saw the case as emblematic of a renewed interest in the enforcement of corporate practice of medicine laws and hoped that a decision in favor of AAEM-PG could signal an increase in scrutiny of private equity ownership in healthcare.
Envision insisted that the lawsuit played no factor in its decision to exit California, stating, "Envision previously decided to exit all its management services and administrative operations in California, where we have been decreasing our footprint over the past several years.”
Although the case can no longer set a precedent, other future litigants could use the blueprint developed by AAEM-PG, and state governments will likely continue to consider legislation to strengthen corporate practice of medicine laws.
While Federal Pharmacy Benefit Manager (PBM) Legislation is in Limbo, Lawsuits Against PBMs for Unfair Business Practices Continue
Vermont Attorney General Accuses PBMs Of Illegal Practices
On July 17, the Vermont Attorney General filed suit against two PBMs, claiming that they steered patients toward more expensive drugs and used a rebate system to get payments from prescription drug manufacturers in violation of Vermont consumer protection laws. The suit claims this system enriched the PBMs at the expense of payors, including the state of Vermont, and patients who use specialty drugs. According to the AG, these two PBMs (Express Scripts and CVS) control approximately 95 percent of the state's commercial market. The state contends that misrepresentations and omissions made by the PBMs were likely to deceive reasonable consumers, affecting their decisions regarding drug prices and drug purchases, and that the unfair conduct of the PBMs resulted in higher drug prices and foreclosed access to lower priced medications, all of which violate the Vermont Consumer Protection Act. The Attorney General is seeking a court order to end the practices, and an unspecified amount of damages.
Louisiana Suit Claims PBM Market Power Harms Unfairly Harms Independent Specialty Pharmacies
On July 26th, the AIDS Healthcare Foundation filed a federal antitrust and state unfair trade practices suit against Express Scripts, the largest PBM in the state. The foundation claimed Express used its market power to harm competition and steer patients to its own specialty pharmacy, preventing independent specialty pharmacies from competing. The suit contends that Express Scripts actions constitute attempted monopolization, monopoly leveraging, and agreement to unreasonably restrain trade, all in violation of the Sherman Act, as well as unfair trade practices violating Louisiana’s Unfair Trade Practices and Consumer Protection Law (R.S. 51:1401, et seq.).
Setback in Hawaii Lawsuit Against Major PBMs
On July 16, the Federal District Court of Hawaii dismissed the state’s lawsuit claiming that the top three PBMs had used unlawful business practices that resulted in skyrocketing prescription prices. In the memo supporting the motion to dismiss, the defense claimed that the state is a direct participant in and beneficiary of the alleged wrongdoing. The court gave the state 45 days to amend their claim for reconsideration. The state originally filed the case on October 4, 2023.
FTC Issues Report on PBM Business Practices
On July 9, 2024, the FTC published an interim report on PBMs, describing how “amidst increasing vertical integration and concentration, these powerful middlemen may be profiting by inflating drug costs and squeezing Main Street pharmacies.” On August 1, Commissioner Rebecca Kelly Slaughter issued a statement on the interim report noting that the study is not yet final, but stressing the importance of releasing the information the FTC had uncovered to date.
The Wall Street Journal has reported that the FTC intends to sue the three largest PBMs over tactics for negotiating drug prices, rebates the PBMs broker with drug manufacturers, and steering patients to high-cost drugs. However, the FTC has not indicated that anything is imminent.
Update on the FTC’s Attempt to Ban Noncompetes
The convoluted journey of the FTC’s attempt to ban noncompete agreements has taken another turn. On July 23, a Federal District Court Judge reversed a ruling from a lower Federal Court in Texas that had temporarily blocked the FTC from enforcing the rule, pending ongoing litigation. The most recent ruling states that the FTC has the power to ban anticompetitive practices, including noncompete agreements. The ruling also states that the plaintiff had not shown that it would suffer irreparable harm from the rule if it were allowed to go into effect while related lawsuits proceed. The noncompete rule is set to take effect on September 4. Four states (California, Minnesota, Oklahoma, North Dakota) have state laws that ban most noncompete agreements and at least a dozen more states have laws limiting their use, but the FTC rule would be the first nationwide prohibition.