A safety net health care provider has won a $10.3 million interim arbitration judgment against Eagan-based Prime Therapeutics over price-fixing allegations between the local pharmacy benefits manager and a rival firm.

The AIDS Healthcare Foundation (AHF), which provides pharmacy services to patients with HIV in states across the country, alleged in a 2023 complaint that Prime Therapeutics fixed its prices to lower payment rates set by Express Scripts Inc. and thereby shorted the nonprofit pharmacy millions of dollars when it filled patient prescriptions.

Following a seven-day arbitration hearing last August, an arbitrator ruled earlier this month that Prime had engaged in price-fixing with Express-Scripts in violation of federal and state laws, and barred the two companies from collaborating on how Prime provides drugs and pricing to AHF. The ruling does not apply to other entities that get services from Prime, the company said.

AHF, based in Los Angeles, said Prime Therapeutics lowered its payment rates shortly after announcing a “collaborative” agreement with Express Scripts in late 2019 that was touted as making care more affordable.

Prime and Express Scripts are two of the country’s largest pharmacy benefit managers, which are companies that structure drug benefits within patient health plans including the pharmacy networks where patients can fill prescriptions.

“Prime has not shown that the pro-competitive benefits are material enough to offset the substantial anticompetitive impacts of the collaboration,” arbitrator Stuart Widman wrote in a Jan. 17 ruling. “AHF has shown that the collaboration was and is an unreasonable restraint of trade and ... has proven its antitrust injury in the form of reduced revenues, as well as antitrust injury to the market.”

The PBM industry has been embroiled in controversy over the past year amid allegations that companies' covert business practices increase consumer costs while running independent pharmacies out of business — allegations that PBMs vigorously deny. Critics are pushing for reforms in Congress even as the industry is pushing back against regulatory efforts in Minnesota and other states.

The ruling found the collaboration was a price-fixing agreement that impacted Prime’s pricing of reimbursements, not just to AHF but to the industry.

For certain pharmacies in the Medicare Part D program, the goal was to reduce by an additional 9% the compensation paid to Prime’s network pharmacies, according to the ruling. The arbitrator referred to evidence showing $2.5 billion of cost savings that reflected the nationwide reduction of reimbursements to pharmacies.

“The purpose and effect of the collaboration were clear: it was designed to, and had the desired effect of, pegging Prime’s reimbursements to nationwide pharmacies to [Express Scripts'] rates so that Prime could save those costs across its pharmacy networks,” Widman wrote.

“AHF is and was emblematic of the larger class affected by the collaboration. Thus, pharmacies nationwide also suffered antitrust injuries in the form of reimbursements below competitively-based pricing.”

In a statement, Prime Therapeutics said it “strongly disagreed” with the ruling. The company is jointly owned by nonprofit health insurers that use the Blue Cross and Blue Shield brands, including the Blues affiliate in Minnesota.

“In this arbitration brought by AHF, Prime demonstrated how actual patients saved on prescription drugs as a result of the agreement,” Prime Therapeutics said in its statement. “With this ruling, AHF is seeking to rewind the clock to cause patients living with HIV/AIDS to pay more — not less — at their pharmacy and thereby enrich AHF’s bottom line."

The company added: “This ruling is limited to the Prime/AHF contract; no other pharmacy contracts are impacted by this decision.”

Express Scripts (ESI) did not immediately respond to a request for comment.

In a news release, AIDS Healthcare Foundation said Prime was ordered to reimburse for underpayments since June 30 and until the PBM “ends the price-fixing gouging.”

“Through this case and with this ruling, the Prime-ESI ‘collaboration’ has been clearly exposed as per-se-illegal horizontal price-fixing — the cardinal sin of antitrust law and felonious behavior that government antitrust enforcement agencies ... should help put a nationwide end to immediately, for all victims,” Jonathan M. Eisenberg, lead counsel for the foundation, said in a statement.

Express Scripts is owned by Connecticut-based health insurance giant Cigna and stands as one of the Big Three in the pharmacy benefit manager industry, along with Rhode Island-based CVS Health and Optum Rx, which is a division of Eden Prairie-based UnitedHealth Group.

Prime Therapeutics is among the next three largest PBMs across the country, according to a Federal Trade Commission report last year.

In its statement, Prime cited its “mission to make medications more affordable for our clients and the members we serve. We entered into our arrangement with Express Scripts to advance these goals and in compliance with all applicable laws.”