Court Cases

PBM Lobby’s Legal Victory Is Perhaps an Even Bigger Deal to Large Employers

A federal appeals court on Aug. 16 delivered a significant victory for the under-fire PBM industry, ruling that an Oklahoma law regulating PBMs is preempted by federal statutes. Officials at lobbying groups that are closely watching the case say that the dispute may wind up before the Supreme Court — and if that occurs, employer plan sponsors will arguably have more at stake than PBMs themselves.

“I think it is highly likely to be appealed and to be pursued further,” says Dillon Clair, director of state advocacy and litigation at the ERISA Industry Committee (ERIC), which represents the employee-benefits interests of large employers. “This is a big case, not just for Oklahoma and their law and the employers that are going to have to comply with that, but for all the other state laws that have [been] enacted” and for states looking to follow suit.

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News Briefs: Connecticut AG Scolds Insurers for High Rate Hike Requests

Connecticut’s top law enforcement official is coming out swinging against big rate hikes requested by health insurers that sell plans in the state’s individual and small-group markets. In an Aug. 15 letter to Connecticut Insurance Commissioner Andrew Mais, Attorney General William Tong points out that the state’s Insurance Dept. may only approve rates that are not “excessive, inadequate or unfairly discriminatory,” and insurers must provide “transparent, factually supported actuarial analysis” to justify their rates. “In at least the case of Cigna’s 14.9 percent increase in the small group market, Anthem’s 9.8 percent increase in the individual group and 14.9 percent increase in the small group market, and ConnectiCare’s 17.5 percent increase in the individual market, the insurers have failed to meet that burden and their requests must be rejected,” Tong wrote.

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News Briefs: Judge ‘Permanently’ Bans New York City From Executing Retiree MA Plan

Manhattan Supreme Court Justice Lyle Frank issued an order “permanently” banning New York City from pushing some 250,000 retirees and their dependents into a private Medicare Advantage plan managed by CVS Health Corp.’s Aetna. Led by Mayor Eric Adams (D), the city has spent the last couple of years trying to implement a group MA plan for its retired workers, who continue to protest the switch for a variety of reasons, namely that the plan goes against a longstanding promise to provide them with free and comprehensive health care coverage in retirement. Frank previously ruled that the proposal violated city law by charging retirees $191 per month to maintain their fee-for-service Medicare coverage. In July, Frank granted the petitioners’ request for a preliminary injunction, which temporarily barred the city from executing its plan. In a decision issued Aug. 11, Frank ordered that the city be “permanently enjoined from requiring any City retirees and their dependents from being removed from their current health insurance plan(s), and from being required to either enroll in an Aetna Medicare Advantage Plan or seek their own health coverage.” On Aug. 14, the NYC Office of Labor Relations posted a new update to its retiree health benefits webpage stating that there is “no Opt-Out or Waiver deadline in effect due to an injunction issued by the court” and all current health plans remain in effect. Meanwhile, Aetna appreciates the agreement between the plaintiff’s counsel and the city “to not conduct any additional hearings, briefings or discovery in order for Judge Frank to immediately issue his decision,” according to Rick Frommeyer, senior vice president with Aetna Group Retiree Solutions. “This approach speeds the appellate review of this matter. We look forward to the City’s appeal.”

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News Briefs: Independence Blue Cross-Led Coalition Will Probe Clinical Decision Support Tools

Independence Blue Cross has convened a group of hospitals and providers in Pennsylvania and New Jersey that will evaluate 15 clinical decision support tools “that adjust results based on a person’s race, potentially causing delays and inequities in care,” according to an Aug. 10 press release. The companies plan on eliminating the use of race as a variable in some of those tools and discussing alternatives that “do not reinforce a biological understanding of race.” The group is called the Regional Coalition to Eliminate Race-Based Medicine and includes Children’s Hospital of Philadelphia, Doylestown Health, Grand View Health, Jefferson Health, Main Line Health, Nemours Children’s Health, Penn Medicine, Redeemer Health, St. Christopher’s Hospital for Children, Temple Health, Trinity Health Mid-Atlantic and Virtua Health.

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Lawsuits Target Big-Batch Claims Denials by Cigna, UnitedHealth

In recent days, health plan members and the U.S. Dept. of Labor (DOL) filed lawsuits against The Cigna Group and UnitedHealth Group, respectively, over what they call unfair, systematic patterns of claims denials. Experts tell AIS Health, a division of MMIT, that the processes behind claims denials in the commercial space — and the purpose-built software that carriers use to adjudicate those claims — are likely to be the subject of intense legal and political scrutiny in coming years.

Plan members seeking to form a legal class filed a suit against Cigna in a California federal district court on July 24. The complaint centers on what it calls an “illegal scheme to systematically, wrongfully, and automatically deny” claims using “an algorithm known as PxDx” that Cigna “relies on…to automatically deny payments in batches.”

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Life Sciences M&A Activity Looks to Be Trending Up

While merger and acquisition (M&A) activity in the life sciences industry has been a bit of a mixed bag the past few years, the first half of 2023 may indicate that deal making is picking up, say industry experts. Some headwinds may make it challenging at times, but the overall sentiment is a positive one.

“In life sciences, it’s a period of smart optimism as we head into the back half of the year” in terms of M&A activity, declares Kristin Pothier, healthcare & life sciences deal advisory & strategy leader at KPMG. “The overall biopharmaceutical deal market began to see a significant slowdown in the fourth quarter of 2022, and from a deal volume standpoint this carried through into the first quarter of 2023. As we look at all the potential for megadeals of the past, we don’t expect to see that as we move to the end of” the 2023 fiscal year and into FY 2024.

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News Briefs: Facing Lawsuit, Cigna Defends Claims-Review Algorithm

A lawsuit filed July 24 in a California district court accuses Cigna Healthcare of violating a state law requiring insurers to give each claim a “thorough, fair and objective investigation.” The proposed class-action suit filed on behalf of two Cigna enrollees claims that the insurer uses the system PxDx to deny claims in bulk rather than examine them individually. It cites a ProPublica article published in March that found Cigna doctors denied over 300,000 requests for payment using PxDx over a two-month period in 2022, spending an average of just 1.2 seconds reviewing each request. Cigna, however, hit back in a press release issued July 27 “in response to recent media representations.” The insurer says that PxDx is “a simple process that has successfully helped accelerate payments to physicians for common, relatively low-cost tests and treatments over the last several years,” adding that patients “are not denied care through this review in any way — it occurs after the patient has received treatment and once their physician bills for the treatment.” What’s more, the “vast majority” of claims reviewed through the PxDx process are automatically paid, the firm said, adding that CMS and other health insurers use a similar process.

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News Briefs: Cleveland Sues PBMs Over Insulin Prices

The City of Cleveland on July 24 filed a lawsuit against PBMs and drug manufacturers, alleging they “orchestrated a pricing scheme that resulted in skyrocketing insulin prices and cost the city millions of dollars in prescription benefit payouts.” The companies named in the lawsuit include The Cigna Group’s Evernorth and its PBM/pharmacy subsidiaries Express Scripts, Medco Health Solutions and ESI Mail Pharmacy Services; CVS Health Corp. And its Caremark division; UnitedHealth Group and its Optum, Optum Rx and Optum Insight subsidiaries; as well as Eli Lilly & Co., Novo Nordisk Inc., and Sanofi-Aventis U.S. LLC. Cleveland is the first city to file such a suit; California filed a similar complaint in January, however, accusing largely the same companies of insulin price-fixing.

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News Briefs: Whistleblower Alleges California Blues Didn’t Pay Taxes

Two Blues affiliates allegedly avoided hundreds of millions of dollars in taxes between 2016 and 2020, a whistleblower said in a complaint filed with the Internal Revenue Service (IRS). Blue Shield of California is alleged to have evaded $111 million in taxes during that period, and Elevance Health's California division allegedly avoided paying $60 million. According to a Stat report, “If the IRS finds Blue Shield violated tax laws, the insurer could owe more than $300 million, an amount that would include the unpaid taxes as well as penalties for committing fraud. Elevance could owe $165 million. If successful, whistleblowers are eligible to receive between 15%-30% of whatever the IRS collects.” The same whistleblower, Michael Johnson, “also filed a similar complaint about Blue Shield in 2018,” per Stat, which the IRS ultimately dismissed.

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New Antitrust Regs Could Slow Health Care Deals, Limit Data Sharing

The Dept. of Justice (DOJ) and Federal Trade Commission (FTC) on July 19 released new draft guidance outlining its approach to antitrust enforcement after rescinding decades-old regulations the week before. The moves could further entrench and formalize the Biden administration’s aggressive anti-consolidation agenda. Health care insiders tell AIS Health, a division of MMIT, that the proposed guidance’s impact on health care insurers and providers is far from certain, but they say that the proposal could complicate any or all of data sharing, quality ratings, and value-based contracting — and stymie an active dealmaking environment.

The draft guidance, which is subject to a public comment period and may change, could have profound impacts on the broader economy, not just health care. The Biden administration’s antitrust regulators have evinced much more aggressive legal and economic theories of antitrust enforcement than any administration in decades. The new guidance is further evidence of the administration’s willingness to try and block deals such as acquisitions by health insurers of providers; provider mergers; and insurer deals for other non-insurance assets, such as business services and technology firms.

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