Irmat Pharmacy on Park Avenue in Manhattan still looks like the neighborhood drugstore it has been since the 1970s.
But two years ago it added a new business as a nationwide mail-order dispenser of expensive drugs for acne and other skin conditions. That business has prospered, and Irmat has grown to 208 employees today from 20 in 2012.
Now, however, Irmat’s very existence is threatened, it says, because a large pharmacy benefit manager plans to stop doing business with it at the end of this month. Irmat is suing that company, OptumRx, which is owned by UnitedHealth Group, the insurance giant, in an effort to stop that from happening.
It appears to be the latest skirmish in a budding war between pharmacy benefit managers, which seek to rein in spending on drugs, and mail-order pharmacies, which have been increasingly enlisted by drug manufacturers to help protect their products from being swapped for cheaper generic alternatives.
In the most notable example, Optum, Express Scripts and CVS Caremark abruptly stopped doing business last month with Philidor Rx Services, which was reported to have used questionable tactics to increase the sales of dermatology drugs made by Valeant Pharmaceuticals International. Once those practices drew public criticism, Valeant said that it would sever its ties to Philidor and that Philidor would be closed.
This week Express Scripts, the nation’s largest pharmacy benefit manager, terminated its relationship with Linden Care, a Long Island pharmacy that participates in a program called Prescriptions Made Easy aimed at increasing the sales of pain relievers sold by Horizon Pharma. Linden Care filed suit seeking to revoke that action.
“Disclosures about Valeant and Philidor opened a lot of payers’ eyes as to what might be going on out there,” said Adam J. Fein, president of Pembroke Consulting, which tracks the pharmacy business. “Unfortunately, all pharmacies should now expect much greater oversight.”
The growing scrutiny of these pharmacies and drug-pricing practices have contributed to significant declines in the share prices of Valeant, Horizon and some other companies.
Matt Stearns, a spokesman for Optum, said Irmat was being removed from Optum’s network because it violated its contract, which, for reasons of patient safety and service, prohibits retail pharmacies from dispensing drugs by mail without proper accreditation. “Nothing prevents Irmat from pursuing those accreditations,” he said.
Irmat receives most of its revenue from dispensing dermatology drugs made by two companies, Galderma and Aqua Pharmaceuticals. And in a section of its website titled “What we do for manufacturers,” Irmat says the use of its mail-order service can reduce the generic substitution that could occur if a patient goes to the corner drugstore.
“Too often, big-box pharmacies will swap name brands for generics to save time,” the website says. “We work every day to make sure the prescriptions doctors write are the drugs patients receive.”
The mail-order pharmacies say the real reason they are being targeted is that the pharmacy benefit managers own their own mail-order businesses and are trying to stifle competition. This issue might be looked at during a hearing in the House of Representatives on Tuesday examining competition in the pharmacy benefit management and pharmacy businesses.
“The result is a perverse system whereby Optum has the incentive and the ability to eliminate pharmacies that provide competing mail-order pharmacy services by terminating them from Optum’s network,” Irmat says in its complaint, which was filed on Thursday in New York State Supreme Court in Manhattan.
The lawsuit says Optum is on a campaign to eliminate all significant competition to its mail-order business, though it did not name any other pharmacies that are being terminated. Mr. Stearns of Optum said the company was concerned with contract violations, not competition.
Timothy P. Walbert, the chief executive of Horizon, was even more scathing in a statement after Express Scripts cut off Linden Care.
“Our philosophy of ensuring that patients get the medicine their doctors prescribe is threatening Express Scripts’ profiteering and exposing what we believe is a lack of care for patients and respect for physicians,” Mr. Walbert said. He added that Express Scripts had a conflict of interest because it was “both a pharmacy’s overseer and competitor.”
An Express Scripts spokesman said there was a difference between pharmacies like the one it owns that handle many drugs and “captive” ones that seem aimed at increasing sales of a particular manufacturer. Linden Care disputed that characterization, saying it was not owned by Horizon and dispensed drugs from other manufacturers as well.
The use of mail-order pharmacies for this purpose seems most common in dermatology, probably because many drugs for acne and other skin conditions are brand-name formulations of generic medicines. While the manufacturers argue that their particular formulations provide some extra value, health plans and pharmacy benefit managers do not always see it that way. They put high co-payments on these drugs to discourage their use, and pharmacies will often try to substitute generics.
So the drug companies have started to encourage doctors to submit their prescriptions to the mail-order pharmacies, which will not substitute a generic and which administer programs that subsidize the patient’s co-payments. The pharmacies also deal with the insurance companies, relieving doctors of the paperwork they would have to submit to justify their choice of an expensive drug.
Galderma, which is owned by Nestlé, sells the acne drug Differin, which costs at least $535 a tube, according to the website GoodRx.com. A tube of the generic form, adapalene gel, sells for about $100.
Galderma said in a statement that Irmat is only one of the pharmacies it uses and that most of its drugs go through retail pharmacies. It said it owned no pharmacies and no pharmacy handled its products exclusively.
Aqua is owned by the Spanish drug company Almirall, which said in a recent financial report that American dermatology sales grew 53.5 percent in the first nine months of this year. One of its big sellers is the acne drug Acticlate, which costs more than $700 for 30 tablets and is a form of the generically available antibiotic doxycycline. Aqua executives did not return calls seeking comment.
Irmat says in its complaint that Optum has known since 2013 that Irmat was mailing drugs out of state but didn’t take action until that operation grew to a meaningful size. Irmat’s revenue from Optum members increased from $2 million in 2012 to $15.3 million last year and a projected $33 million this year.
Irmat said it had not seen a new contract prohibiting mail order because it dealt with Optum through an intermediary. It said Optum was not giving it the time to earn the accreditations needed to become a mail-order pharmacy.
Optum accounts for 27 percent of Irmat’s business, according to the lawsuit. Irmat says that it fills 11,000 prescriptions a month for Optum members and that patient care would be disrupted if it was cut off. It said it also might have to go out of business because dermatologists, not wanting to be bothered figuring out which patients use which pharmacy benefit manager, might simply stop sending any prescriptions to Irmat.
Irmat is owned by Victor Falah, a pharmacist who bought the business in 1995 from the previous owners, who were named Irwin and Matthew and gave the pharmacy its name, according to the lawsuit. Matthew L. Cantor, a lawyer representing Irmat, said Mr. Falah would not be available for interviews.
Source: The New York Times