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April 26, 2004
Washington among 20 States to Settle with Medco Health Solutions

SEATTLE -- A settlement which could help reduce drug costs and improve medical care for 60 million Americans was announced today by Washington Attorney General Christine Gregoire.

The settlement is with Medco Health Solutions, Inc., which is the largest pharmacy benefit manager (PBM) in the United States, and is involved in 20 percent of all drug sales in the country. PBMs contract with health plans to process prescription drug payments to pharmacies for drugs provided to patients enrolled in the health plan. PBMs now process about two-thirds of all prescription drug spending in the United States.

As one of the lead states in the case, Washington joined 19 other states in reaching the agreement with Medco. At issue in the case was full disclosure of information that patients, doctors and drug companies needed to make decisions about which prescription drugs to use.

The Attorneys General contend Medco withheld critical information, such as cost savings, that is needed to make informed decisions.

Gregoire said Attorneys General also discovered that Medco received rebates for recommending that doctors and health care plans switch drugs from one patented brand name to another. Medco, the Attorney Generals maintain, often didn’t inform patients, doctors or health plans of hidden costs in making the switch or that Medco had a financial interest in promoting the switches.

“This settlement will bring much needed change in the pharmacy benefits’ industry,” said Gregoire. “It is about providing more honesty and integrity in what people are told about their prescription drug purchases.”

Under the settlement Medco agrees to provide doctors and consumers with more information so they can make better, more informed decisions about their prescription drug purchases.

In the settlement, filed today in King County Superior Court, Medco has agreed to change its business practices and pay $20.2 million to a consumer fund. Nearly $700,000 of that money will go to Washington consumers. The AG’s office will set up an advisory committee to recommend how the money should be distributed.

The settlement also calls for $2.5 million in reimbursements to consumers who may have paid for follow-up medical treatment after being switched from one high cholesterol medication to another.

The settlement requires Medco:

  • Tell physicians and consumers how much money the patient and health care plan is saving on any drug brand switches it proposes;
  • Reimburse consumers for any hidden costs that result from certain drug switches;
  • Disclose information relating to rebates it receives from drug manufacturers;
  • Monitor the effect of its drug changes on patients; and,
  • Provide a simple system for a patient to switch back to the original prescribed drug at no extra cost if he or she so chooses.



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