The Maryland Heights, Missouri-based company increased the cost of drugs to New York’s Empire Plan by pocketing rebates from drugmakers that should have gone to the plan, Spitzer said in a conference call with reporters.
“They are using their role as an intermediary not to live up to their fiduciary duty to their clients but to line their own pockets,” Spitzer said. “This is an unfortunate tale, a violation of trust, a violation of duty.”
The suit is Spitzer’s third action against the drug industry in the past three months, following an inquiry into Johnson & Johnson’s clinical trials of six drugs and allegations that GlaxoSmithKline Plc suppressed negative research on the use of the antidepressant Paxil in children.
“The company will defend itself vigorously in court,” Express Scripts said in a statement. The company has said it will set aside between $15 million and $20 million for its legal defense costs.
Express Scripts has saved New York State $2 billion in drug costs since 1998, the company said. The state received more drug rebates than it was guaranteed under the contract, it said in the statement.
State attorneys general are in the midst of investigating major pharmacy-benefit managers’ business practices. Medco Health Solutions Inc., the largest U.S. pharmacy-benefit manager, paid 20 states $29.3 million in April after state attorneys charged that the company received payments from former parent Merck & Co. to switch patients to its drugs.
Caremark Rx Inc., the second-largest U.S. pharmacy benefit manager, has also received subpoenas from state attorneys. The inquiries are “similar in nature” to those at Medco and Express Scripts, Caremark Chief Executive Officer Edwin Mac Crawford said last week on a conference call with investors and analysts.
The New York suit, which alleges that Express Scripts failed to pass on savings from rebates it received from drugmakers, indicates that investigations of drug-benefit managers may be gaining scope, said Andrew Speller, an analyst with A.G. Edwards & Sons Inc. in St. Louis who rates Express Scripts shares “buy” and doesn’t own them.