Maryland's attorney general yesterday accused four of the largest pharmacy retailers in the area -- Giant Food Inc., Safeway Inc., K mart Corp. and Rite Aid Corp. -- of entering into illegal agreements to eliminate discounts on prescription drugs purchased by members of one of the state's largest health maintenance organizations.
The antitrust suit, filed yesterday in Baltimore, concerns the cash payment -- or "co-pay" -- made by members of CareFirst every time they get a prescription filled.
According to the charges, the four retailers, along with an association of independent pharmacies called Prescription Network of Maryland and a claims processing company, signed agreements that required them to charge the full amount of the "co-pay."
Prior to the agreement, it was common for retailers to discount or even waive the co-pay, which was generally around $3, according to Ellen E. Cooper, deputy chief of the antitrust division of the attorney general's office.
All the defendants except Rite Aid have agreed to settle the case, though they do not admit to any wrongdoing, according to the attorney general's office.
"We don't admit we did anything wrong," said Giant general counsel David W. Rutstein, noting that the suit against his company was separate from the others and did not allege a conspiracy. "The only claim relates to one paragraph in one contract" with the HMO, CareFirst, he said. "It's at worst a technical violation."
A spokeswoman for Rite Aid, which apparently plans to fight the suit, said the company had not entered into an agreement with any competitor, "therefore we did not violate any antitrust laws."
Other defendants could not be reached for comment.
The companies that have settled have agreed to refund some $120,000 to roughly 45,000 members of CareFirst who had prescriptions filled from March 1988 through May 1989.
Since pharmacies keep careful records of prescriptions, Cooper said it should be relatively easy to determine who is entitled to a refund. The settlement still must be approved by a judge, after which consumers should begin receiving notices of the refunds and forms for claiming them.
Cooper said the case "all started with a single consumer complaint to us," someone who had been getting a discount and then suddenly was unable to. Cooper said a two-year investigation, focused in the Baltimore area, led to the allegations of conspiracy.
Members of CareFirst receive a paid-prescription card, entitling them to have their prescriptions filled at no charge beyond the co-pay at participating pharmacies.
Pharmacies often compete for such business by absorbing part of the co-pay or eliminating it altogether.
PNM was formed in 1987 by independent pharmacies to process prescription drug claims to insurers and HMOs, according to the attorney general's office. Its bylaws prohibited members from waiving or discounting the co-pay. Rite Aid, Safeway and K mart joined. Giant did not join, but, according to the attorney general, did sign a contract with CareFirst agreeing not to discount the fees.
Ironically, CareFirst -- which agreed to the no-discount policy -- was not charged in the suit. Cooper said the HMO's overriding concern was to be able to offer its members as wide a choice of pharmacies as possible. "We view this as primarily a ... conspiracy among the pharmacies," she said.