The Retail Litigation Center (RLC) has joined the National Association of Chain Drug Stores, the National Community Pharmacists Association and other pharmacy and retail organizations in an amicus brief filed with the Minnesota Supreme Court regarding a case involving generic drug substitution.


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Amicus brief filed in generic substitution case

September 6th, 2013

ARLINGTON, Va. – The Retail Litigation Center (RLC) has joined the National Association of Chain Drug Stores, the National Community Pharmacists Association and other pharmacy and retail organizations in an amicus brief filed with the Minnesota Supreme Court regarding a case involving generic drug substitution.

RLC said Friday that the brief asks Minnesota's high court to reverse a decision that could be "opening the door for private lawsuits against pharmacies for violations statutes regarding generic drug substitution," and in turn impacting consumers' access to affordable prescription drugs.

In the case, Graphic Communications Local 1B Health & Welfare Fund et al v. CVS Caremark Corporation et al., two Minnesota-based employee health funds alleged that CVS Caremark, Walgreen Co., Walmart Stores Inc., Target Corp., Kmart Holding Corp., Coborn's Inc. and other pharmacy operators overcharged customers for generic drugs. Specifically, the funds claim that the pharmacy operators didn't pass on the full savings they receive by filling prescriptions with generic equivalents of branded medications, which carry higher acquisition costs.

Minnesota law requires Minnesota-licensed pharmacists to substitute a generic, if available, when a consumer is prescribed a brand-name drug. In addition, pharmacies must convey to the consumer cost savings realized by the lower acquisition costs of the generic medication drug versus the name-brand counterpart.

Pointing to pharmaceutical industry practices such as retroactive price adjustments and third-party negotiations, RLC noted that the court decision places "an impossible choice on pharmacies" by forcing them to try to calculate the acquisition cost of drugs at the point of sale or face expensive litigation.

Besides NACDS and NCPA, those signing the Sept. 6 brief include the Minnesota Pharmacists Association, Minnesota Retailers Association, Independent Pharmacy Cooperative, Thrifty White Pharmacy and Minnesota Chamber Of Commerce. RLC is a public policy group that identifies and engages in legal proceedings affecting the retail industry.

"When the Substitution Statute was enacted nearly 40 years ago, the market for generic prescription drugs did not exist. The availability of generic equivalents was relatively new, and most Americans paid full retail rates. Today, generics account for approximately 69% of all prescription drugs dispensed in the United States," stated the brief filed with the Minnesota Supreme Court.

"What is more, if the pharmacies are forced to bear that increased cost themselves, thereby further reducing their already slim profit margins, some Minnesota pharmacies may not survive," the RLC brief said. "Minnesota consumers would lose pharmacy access and ultimately have to spend more to acquire their prescription drugs."

In addition, the brief said, "By accepting plaintiff's flawed statutory interpretation, the court of appeals' decision introduces debilitating uncertainty to pharmacy pricing contracts adopted by private and governmental payers alike and threatens the viability of future pharmacy reimbursement contracts."

RLC said it has been involved on the generic substitution issue in multiple states, joining with a number of associations to file an amicus brief in State of Michigan v. CVS Caremark et al. "This case saw the courts impose similar, costly disclosure obligations on Michigan pharmacies or risk expensive fraud claims," the group stated.

If the Minnesota Supreme Court upholds the decision, it's likely that costs would be passed on to consumers and pharmacy operators could face potential closures.

"The obligations created here, while well-intentioned, fail to take into consideration the reality of the industry or the legislative intent of the statutes in question," explained RLC president Deborah White. "Opening the floodgates for private lawsuits, using provisions designed for administrative oversight, will create a hostile business environment where providing affordable medication is equated to committing fraud. The case must be reversed, or damages to the health care infrastructure in Minnesota are inevitable."

The two Minnesota funds filed their lawsuit in state court in July 2009, and subsequently the pharmacy defendants has the case removed to federal district court. In November 2009, the federal court granted the pharmacy defendants motion to dismiss the complaint without prejudice. The funds then filed an amended complaint and moved to remand the case to state court, which was granted by the federal district court.

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