U.S. probes contracts between drugmakers, pharmacy benefit managers

(Reuters) - The U.S. Attorney’s Office for the Southern District of New York is investigating contracts between drugmakers and companies that manage prescription benefits, according to regulatory filings.

Products made by Johnson & Johnson for sale on a store shelf in Westminster, Colorado in this file photo dated April 14, 2009. REUTERS/Rick Wilking

Federal prosecutors have approached at least three companies, including Johnson & Johnson JNJ.N, Merck & Co MRK.N and Endo International Plc ENDP.O, demanding information about their contracts with pharmacy benefit managers.

Pharmacy benefit managers, or PBMs, which administer drug benefits for employers and health plans and also run large mail-order pharmacies, have been challenging the rising cost of new medications.

When drugs are knocked off their formularies, patients may have to pay full price for them. PBMs often keep or dump a product depending on whether they can obtain favorable pricing.

J&J said in a regulatory filing on Tuesday it had received a “civil investigative demand,” seeking information about its contractual relationships with pharmacy benefit managers over some of its products from early 2006 through the present.

Merck said on Monday it had received a demand for information about contracts with, services from and payments made to PBMs in relation to its migraine drug, Maxalt, and erectile dysfunction treatment Levitra, over the same period. (

Endo said last week it was cooperating with such an investigation, looking into its PBM contracts for its migraine therapy, Frova.

The companies did not disclose the name of any PBM in their respective filings. Express Scripts Holding Co ESRX.O is the largest U.S. pharmacy benefit manager, followed by CVS Health CVS.N.

Merck and CVS were not immediately available for comment. Endo, Express Scripts and the U.S. Attorney’s Office for the Southern District of New York declined to comment.

A J&J spokesman said the company had nothing more to add to what it had already published in its filing.

Last November, a U.S. unit of Swiss drugmaker Novartis AG NOVN.S agreed to pay $390 million to settle U.S. charges that it paid specialty pharmacies illegal kickbacks in exchange for inducing patients to refill certain medications.

The sector has come under intense scrutiny, particularly after Canadian drugmaker Valeant Pharmaceuticals International Inc VRX.TOVRX.N was forced to sever ties with Philidor Rx over the specialty pharmacy's billing practices.

Reporting by Natalie Grover in Bengaluru; Additional reporting by Parikshit Mishra in Bengaluru; Editing by Saumyadeb Chakrabarty and Peter Cooney