Labor Department Obtains Judgment Against Pharmaceutical Care Network to Restore Health Plan Assets

26 May 2006

The U.S. Department of Labor today announced a consent judgment requiring Sacramento- based Pharmaceutical Care Network (PCN), a pharmacy benefits manager, to restore $721,323 to 24 health plan clients and pay civil monetary penalties to the department. The judgment resolves a lawsuit against PCN for allegedly retaining the assets of health plan clients in connection with rebates from drug manufacturers and payments to pharmacies for prescription drug claims.

"Rising health care costs are of concern to everyone!" said Secretary of Labor Elaine L. Chao. "We aggressively pursued compensation for these workers' health plans, including any improper profits gained at their expense."

PCN is a wholly-owned subsidiary of National Medical Health Card Systems Inc. that has processed drug claims, managed pharmacy networks, and negotiated rebates with drug companies for more than168 health plans governed by the Employee Retirement Income Security Act (ERISA).

In addition to restitution, the judgment requires that PCN disclose information to clients relating to pharmacy benefit management services and fees and account for claim payments and rebates.

The lawsuit was filed simultaneously with the judgment in federal district court in Sacramento. The suit alleges that PCN improperly retained a portion of drug rebate amounts belonging to multiemployer health plan clients. The suit also alleges that PCN received undisclosed additional compensation from the plans by retaining the difference between drug prices established by health plan clients and the lower drug prices established between PCN and certain chain pharmacies. In addition, the company allegedly retained an undisclosed transaction fee for each pharmaceutical claim processed.

The case resulted from an investigation conducted by the San Francisco regional office of the Labor Department's Employee Benefits Security Administration (EBSA). Tips on health benefits for small employers may be found at EBSA's Web site under http://www.dol.gov/ebsa/newsroom/fshlthinstips.html.

In fiscal year 2005, EBSA achieved record monetary results of $1.7 billion related to pension, 401(k), health and other benefits for millions of American workers and their families. Employers and workers can reach the San Francisco regional office at 415-975-4600. Help with problems relating to private-sector retirement and health plans can also be obtained by calling EBSA's toll-free number, 866-444-EBSA (3272).

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(Chao v. Pharmaceutical Care Network) Civil Action No. 2:06-cv-01078-LKK-GGH

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