Express Scripts Inc., one of the nation's largest pharmacy benefits management companies, has settled charges brought by 29 states, resolving claims that its drug switching programs are unfair or deceptive.

"This settlement with Express Scripts is part of our office's continued efforts to introduce transparency and fairness to the PBM industry," said Massachusetts Attorney General Martha Coakley. "Through the work of the State Attorneys General, first with Medco, then Caremark and now Express Scripts, we have changed how these companies treat patients and doctors when they ask to change their prescription medications those requests now include full information on cost savings and the reasons for the proposed switch."

As part of the assurance of voluntary compliance, Express Scripts has agreed to make clear and conspicuous disclosures about its business practices to its consumers, doctors and employers, including its policies on initiating any drug interchanges between one brand name drug to another brand name drug.

Express Scripts also will pay $9.3 million to the states and up to $200,000 in reimbursement to patients who incurred expenses related to certain switches between cholesterol-controlling drugs called statins.

The settlement asserts that Express Scripts engaged in deceptive business practices by not always acting in a manner consistent with its representations to consumers and employers about its PBM services. Specifically, Express Scripts may have overstated the cost benefits of switching to certain brand name medicines, which may have resulted in additional medical costs for consumers.

Additionally, Express Scripts did not clearly disclose to their clients plans that rebates accrued from the drug switching process would be earned by Express Scripts.

The settlement generally prohibits Express Scripts from soliciting drug switches when:

• The net drug cost of the proposed drug exceeds the net drug cost of the originally prescribed drug;

• The originally prescribed drug has a generic equivalent and the proposed drug does not;

• The originally prescribed drug's patent is expected to expire within six months; or

• The patient was switched from a similar drug within the last two years.

Additionally, the settlement requires Express Scripts to:

• Inform patients and prescribers what effect a drug switch will have on a patient's co-payment;

• Inform prescribers of Express Scripts' financial incentives for certain drug switches;

• Inform prescribers of material differences in side effects or efficacy between prescribed drugs and proposed drugs;

• Reimburse patients for out-of-pocket expenses for drug switch-related health care costs and notify patients and prescribers that such reimbursement is available;

• Obtain express, verifiable authorization from the prescriber for all drug switches;

• Inform patients that they may decline a drug switch and the conditions for receiving the originally prescribed drug;

• Monitor the effects of drug switches on the health of patients;

• Adopt a certain code of ethics and professional standards;

• Refrain from making any claims of savings for a drug switch to patients or prescribers unless Express Scripts can substantiate the claim; and

• Inform prescribers that visits by Express Scripts' clinical consultants and promotional materials sent to prescribers are funded by pharmaceutical manufacturers, if that is the case.

PBMs enter into contracts with employer and governmental health plans to process prescription drug claims for drugs provided to patients enrolled in those health plans; negotiate with drug companies to obtain discounts; negotiate discounts with participating retail pharmacies to provide dispensing services; and dispense drugs to patients through PBM-owned mail order pharmacies. In the thirty years since the first PBMs appeared, their services have evolved to include complex rebate programs, pharmacy networks, and drug utilization reviews.

The agreement marks the third settlement that the states have entered into with pharmaceutical benefits managers.

In 2004, a group of 20 states settled with Medco Health Solutions, Inc. , the world's largest pharmaceutical benefits manager. In February of this year, a group of 29 states settled with Caremark Rx, LLC, another of the world's largest pharmaceutical benefits managers.

States participating in the settlement are: Arizona, Arkansas, California, Connecticut, Delaware, District of Columbia, Florida, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nevada, New Mexico, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Vermont, Virginia, and Washington.