Lawsuit To Test Physicians Health Services Prescription Limits
By ANDREW JULIEN
This story ran in the Courant December 15, 1999

[Connecticut state] Attorney General Richard Blumenthal opened a new front in the legal assault on HMOs Tuesday, employing a strategy similar to the one a handful of powerful trial lawyers are using to bring class-action lawsuits against managed care companies across the country.

Blumenthal is filing a federal class-action lawsuit against the state's largest HMO, Physicians Health Services, alleging that the company's restrictions on the prescription drugs it covers pose a threat to patient health.

``It has pressured patients to use medicine that is less effective and less safe than is prescribed by their doctors,'' Blumenthal said. ``The goal of our lawsuit is not money. It is very simply to reform the practices of PHS which do not put patients first.''

One of the patients named in the 31-page complaint is Myra Doughney, an East Granby woman who was at her local CVS waiting for a prescription to be filled when the pharmacist told her PHS would no longer pay for an estrogen patch she'd been using.

Other forms of estrogen Doughney had tried had caused diarrhea and vomiting, the lawsuit says, so she fought PHS to win coverage for her patch. Doughney's doctor appealed to the company, explaining why she needed an exception.

``We filled out all the forms, said she needed to be on this medication because it was working for her,'' Dr. David Howlett said. ``They denied it.''

Fearing a return of the side effects, Doughney opted not to use a different form of estrogen. But she suffered hot flashes, mood swings and depression, the lawsuit says. PHS eventually returned the patch to its formulary.

``We are paying an exorbitant amount for our insurance and we are not being treated fairly,'' Doughney said.

Drug formularies - lists of medications covered under a given insurance policy - have been a controversial feature of managed care for years. But officials at Shelton- based PHS said formularies are designed to use the purchasing power of an HMO to keep spiraling drug costs in check.

``We do use our purchasing power to help negotiate better prices with drug companies, but that's one thing that helps keep drugs really affordable to our members,'' said Dr. Tim Moore, chief medical officer at PHS. ``The alternative would be we'd be forced to stop offering pharmacy benefits to our more than 500,000 Connecticut members.''

The lawsuit alleges that PHS uses price, not quality, to determine which drugs to include. But Moore said a panel of clinicians determines which medications should be included before the company negotiates price discounts with the drug companies.

Moore also said the company has procedures to handle appeals. A company spokeswoman said 85 percent of all pharmacy appeals are approved.

``The bottom line is we have policies in place to ensure our members get the medication they need when they need them,'' Moore said.

While PHS is the defendant in this action, Blumenthal said other insurance companies should take notice. He said the lawsuit marks the first time a state has used provisions of the federal employee benefit protection statute known as ERISA to sue an HMO, and he expects other states will join him.

The strategy is at the core of a wave of federal class-action lawsuits that have been filed in recent months against the nation's largest managed care companies, including Aetna U.S. Healthcare and Cigna. ERISA has long been used as a legal shield against liability suits by insurers, but the trial lawyers are using the obligations it imposes on HMOs against them.

That approach puts Blumenthal and some of the nation's top trial lawyers on a similar track - a combination that proved especially powerful in the legal assault against Big Tobacco.

``If the attorneys general get together - as they did in tobacco - attorneys general can have a very significant influence by bringing comparable suits or claims around the country,'' said Clark Kelso, a professor of law at McGeorge School of Law in Sacramento, Calif. ``That puts pressure not just on one company, but on an entire industry.''

But Blumenthal said there is no direct connection between the lawsuits filed by the trial lawyers and his action against PHS, and added that he does not see any joint activity on the horizon.

``They are totally separate and distinct,'' he said.

Blumenthal noted, for example, that the lawsuit against PHS is not seeking financial damages, but a change in policy. The lawsuit is asking for an injunction ordering PHS to change its practices.

``Patients deserve the medicine that is prescribed by their physician,'' Blumenthal said.

A spokeswoman for the managed care industry said it is too early to tell if the PHS lawsuit signals a broader effort, but she said she will carefully evaluate the lawsuit in Connecticut to see if there are similarities with the other lawsuits HMOs are facing.

``We are going to be looking, obviously, very closely at what this complaint actually says,'' said Karen Ignagni, president of the American Association of Health Plans. ``The difference between health plans and tobacco is that working families have a great deal to risk if we go away.''

The Allegation:  The state alleges that Physicians Health Services uses price, not quality, to determine its drug formularies - lists of medications covered under a given insurance policy - thus posing a threat to patient health.

The Response:  PHS says a panel of clinicians determines which medications should be covered, and that formularies use an HMO's purchasing power to hold down spiraling drug costs. The company says 85 percent of all pharmacy appeals are approved.