New York’s insurance regulator, the New York Department of Financial Services (“NYDFS”), recently issued a letter of intent to opioid manufacturers and distributors indicating that it will begin a civil enforcement proceeding against them due to the increase in state health insurance premiums caused by the opioid epidemic. This follows an announcement in September by Governor Andrew Cuomo who said that the state would take legal action to recover approximately $2 billion in insurance premium increases that were passed on to New York consumers.
The NYDFS determined that consumers paid the billions in increased costs over the past 10 years due to alleged misrepresentation of the safety and efficacy of opioids “which in turn has resulted in the over-prescription of opioids, additional addiction treatment and treatment of other adverse health effects association with opioid addiction.” NYDFS issued various subpoenas and document requests to numerous opioid manufacturers, distributors, insurers and pharmacy benefit managers (“PBMs”). The list includes, among others, Purdue Pharma and specific members of the Sackler family, Teva Pharmaceuticals, Cephalon, Jannsen Pharmaceuticals, Amerisource Bergen, McKesson Corporation, Rochester Drug Cooperative, as well as over two dozen PBMs and insurers.
PBMs have generally not been included in other opioid investigations. In this case, however, NYDFS noted that they received information that opioid manufacturers, wholesalers or distributors may have paid PBMs rebates “in exchange for placement of an opioid prescription drug in a favorable drug formulary tier with lower co-pays.” Such conduct could violate federal and state health insurance regulations.
Governor Cuomo has taken a harsh stance on the opioid crisis, referring to it as a “scheme” and noting that it is “as diabolical, as brazen, as obnoxious and as offensive as anything I’ve seen.” Cuomo added, “[t]hese drug companies knew what they were doing. It was not accidental – it was an industry-wide conspiracy. The damage they have caused has been immeasurable …. These drug companies are not going to get away with murder.”
As reported by Reuters, the next stage in the NYDFS action will include an administrative hearing in which the notified entities will try to convince a hearing officer not to start the proceeding. If the case does proceed, NYDFS will seek fines and restitution from the opioid industry, which would ultimately be returned to consumers, possibly as rebates or lower insurance premiums. DFS will also be holding hearings “to expose the problem to consumers and generate transparency with respect to the impact on the health insurance system.”