MN court: Pharmacies can pocket generic drug savings

At first glance, the state’s law on passing along the cost savings when a pharmacy dispenses a generic, rather than a brand-name, drug seems simple enough.

A pharmacist dispensing a drug … shall not dispense a drug of a higher retail price than that of the brand name drug prescribed. If more than one safely interchangeable generic drug is available in a pharmacist’s stock, then the pharmacist shall dispense the least expensive alternative.

Any difference between acquisition cost to the pharmacist of the drug dispensed and the brand name drug prescribed shall be passed on to the purchaser.

Today, however, the Minnesota Supreme Court took some teeth out of the law when it ruled that a union’s insurance fund has no standing to sue the pharmacies who pocketed the savings instead of passing them along to the customer.

Five years ago, the Graphics Communications Local sued CVS, KMart, Target, Snyders, Walgreens, and Walmart for violating Minnesota law.

For example, the suit said, the four-tablet supply of Fosamax in 2008 cost pharmacies $70.72, which they sold for $79.46. The generic Alendronate cost them $6.24 but the union fund claimed the pharmacies sold it for as much as $70.83, overcharging customers $55.85 in this case.

But the Minnesota Supreme Court said the Legislature never intended to give corporations and individuals the right to sue the pharmacies for violating the law.

“Indeed, to do so would require us to add words to the statute that the Legislature did not supply,” Justice Christopher Dietzen wrote in his opinion today.

But Dietzen also ruled that the union benefits funds also can’t sue under the state’s consumer fraud protection law because the pharmacies had no responsibility to disclose the difference in prices and didn’t mislead anyone.

“There is nothing in the Pharmacy Practice Act that required the Pharmacies to disclose their prescription-drug acquisition costs,” he wrote. “The Pharmacy Practice Act imposes upon pharmacists or pharmacies a duty to disclose information in other instances, but does not require disclosure of prescription-drug acquisition cost data.12 Therefore, the Pharmacies did not violate a statutory duty to disclose.”

“Merely stating the purchase price of a product does not constitute a violation of the (consumer fraud law) unless the defendant omits material facts that render the words spoken false, deceptive, or misleading. Put differently, merely stating the purchase price is not deceptive and does not trigger a duty to disclose,” he said.

It’s a big win for retailers who were afraid that if the Supreme Court had upheld the Court of Appeals approval of a consumer fraud suit they would be required to reveal their profit margins.

“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 retailers said in a friend-of-the-court brief in the case. “Minnesota consumers would lose pharmacy access and ultimately have to spend more to acquire their prescription drugs.”

  • kevinfromminneapolis

    How is that even a law??? Pharmacists have to give customers money based on a drug they didn’t sell them? That’s preposterous. I can see the sure-to-be ridiculous legislative “solution” already…

    • That’s not the way I read the law. I read it as having the effect being that your profit margin on a generic shouldn’t be higher than your profit margin on the drug.

      • kevinfromminneapolis

        lol yeah that would make a lot more sense. Sorry I blew up.

  • John O.

    My dad is a retired pharmacist and worked in both retail and hospital settings during his career. I also grew up in his drug store when I was a kid before he went into the hospital portion of his career.

    It’s not the retail price–it’s what the wholesale price is. The problem the pharmacist has is trying to stay ahead of all of the paperwork in order to get reimbursed, and that has to get built into the retail price too. That’s one big reason why so many independent pharmacies are closing up shop.

    Also consider there are different wholesale prices, irregardless of whether it is branded drugs still under patent, or generic equivalents. Retail (Walgreens, CVS, etc.) typically has one pricing structure, hospitals another, and the federal government (for instance, the VA) gets its own.