In 2017, the drug industry middleman Express Scripts announced that it was taking decisive steps to curb abuse of the prescription painkillers that had fueled America’s overdose crisis. The company said it was “putting the brakes on the opioid epidemic” by making it harder to get potentially dangerous amounts of the drugs.
The announcement, which came after pressure from federal health regulators, was followed by similar declarations from the other two companies that control access to prescription drugs for most Americans.
The self-congratulatory statements, however, didn’t address an important question: Why hadn’t the middlemen, known as pharmacy benefit managers, acted sooner to address a crisis that had been building for decades?
One reason, a New York Times investigation found: Drugmakers had been paying them not to.
For years, the benefit managers, or P.B.M.s, took payments from opioid manufacturers, including Purdue Pharma, in return for not restricting the flow of pills. As tens of thousands of Americans overdosed and died from prescription painkillers, the middlemen collected billions of dollars in payments.
The details of these backroom deals — laid out in hundreds of documents, some previously confidential, reviewed by The Times — expose a mostly untold chapter of the opioid epidemic and provide a rare look at the modus operandi of the companies at the heart of the prescription drug supply chain.
The P.B.M.s exert extraordinary control over what drugs people can receive and at what price. The three dominant companies — Express Scripts, CVS Caremark and Optum Rx — oversee prescriptions for more than 200 million people and are part of health care conglomerates that sit near the top of the Fortune 500 list.
The P.B.M.s are hired by insurers and employers to control their drug costs by negotiating discounts with pharmaceutical manufacturers. But a Times investigation this year found that they often pursue their own financial interests in ways that increase costs for patients, employers and government programs, while driving independent pharmacies out of business. Regulators have accused the largest P.B.M.s of anticompetitive practices.
The middlemen’s dealings with opioid makers reveal a lesser-known consequence of this pay-to-play system: Seemingly everything — including measures meant to protect patients and curtail abuse — can be up for negotiation.
The P.B.M.s’ power lies in their role as gatekeepers. They largely control the lists of drugs that insurance plans will cover, and drugmakers compete for position on those lists by offering rebates. The middlemen typically pass along most of these rebates to their clients, but they also keep a portion for themselves.
The drug lists, known as formularies, frequently include restrictions meant to save money by steering patients to cheaper drugs. But for some drugs, such as opioids, restrictions can serve a medical purpose — minimizing the risk of overdose and addiction and limiting the number of pills that could be diverted to the illicit market.
Yet time and again, documents show, the P.B.M.s bargained away safeguards in exchange for rebates.
Purdue’s strategy to ensure broad access to its blockbuster painkiller OxyContin was explicit: “Offer rebates to remove payer restriction,” according to an internal presentation. The company didn’t want doctors to have to provide additional justification for prescribing a powerful narcotic, and it didn’t want strict limits on the number of pills that could be dispensed.
The approach worked. Purdue repeatedly boasted in internal reports that prescribers and patients faced few or no restrictions on access to the drug.
What could have been a backstop against overprescribing instead became a sales tool, records show. After striking deals with P.B.M.s, drugmakers touted the favorable coverage — no second-guessing or paperwork requirements from insurers — as part of an effort to get doctors to write more prescriptions.
Even as the epidemic worsened, the P.B.M.s collected ever-growing sums. The largest of the middlemen bought competitors and used their increasing leverage not to insist on safeguards but to extract more rebates and fees. From 2003 to 2012, for example, the amount Purdue was paying P.B.M.s in rebates roughly doubled to about $400 million a year, almost all of it for OxyContin.
The documents reviewed by The Times — including contracts, invoices, emails, memos and financial data — span more than two decades, beginning with the debut of OxyContin in 1996. Many came from a public repository of records unearthed during court cases and investigations. The Times also obtained more than 200 previously confidential documents from plaintiffs in litigation against drugmakers, P.B.M.s and others.
In the public assignment of blame for the opioid epidemic, the P.B.M.s have largely escaped notice. Drugmakers, distributors, pharmacies and doctors have paid billions of dollars to resolve lawsuits and investigations. But more recently, the largest P.B.M.s have been in the legal cross hairs.
In statements, the P.B.M.s said they had long worked to prevent opioid abuse, while also ensuring that people in serious pain had access to the drugs. They said that for years they had offered their clients — employers, insurers and state and federal programs like Medicaid — the option to impose restrictions on opioids.
Justine Sessions, a spokeswoman for Express Scripts, said most clients had instituted some sort of safeguards for opioids. “Ultimately, our clients control their formularies and all aspects of their drug benefits,” she said.
But this often presented the clients with a fraught choice: If they added restrictions, they could lose the rebates that helped make coverage affordable.
In addition, documents show that P.B.M.s sometimes collaborated with opioid manufacturers to persuade insurers not to restrict access to their drugs.
“Our work behind the scenes is paying off!” one Purdue executive emailed a colleague in 2003, recounting how she had worked with P.B.M.s that later became part of CVS Caremark and Express Scripts to persuade insurers to lift restrictions on OxyContin.
The opioid manufacturer Mallinckrodt similarly credited its collaboration with P.B.M.s with preventing two large insurance companies from imposing restrictions in 2015. “This is a best practice of how to reverse a negative decision,” a Mallinckrodt executive emailed colleagues.
Spokeswomen for Purdue and Mallinckrodt declined to comment.
Employees at Express Scripts and Optum Rx at times raised concerns that rebates were trumping safety considerations, internal emails show.
In 2017, for example, an Optum Rx executive proposed immediately restricting access to the painkiller Opana ER because it was going to be pulled from the market for safety reasons. It was important to prevent new patients from beginning to use the drug in the months before the withdrawal took effect, he wrote.
But another executive objected. “We currently get rebates,” he wrote, “and that would put our rebates at risk.”
Squelching the Pushback
The years following the 1996 rollout of OxyContin proved to be a critical period in the nascent opioid epidemic.
In response to rising costs and news coverage about addiction and abuse, some insurers began restricting access to the drug, requiring doctors to seek authorization before they could write some prescriptions or limiting the number of pills that could be prescribed to a patient each month.
For Purdue, this posed a serious threat. The restrictions, the company noted in an internal planning document, will “create barriers to OxyContin being able to achieve significant growth.”
To knock down these barriers, Purdue needed to win over the middlemen, which held sway over insurers and other clients that counted on the rebates that the P.B.M.s shared with them.
Purdue forged what executives described internally as a “partnership” with Express Scripts and a “special arrangement” with Merck-Medco, one of the nation’s largest P.B.M.s at the time. Together, the drugmaker and the middlemen disseminated purportedly independent guidance on pain management, including a mailing to doctors from Express Scripts that was meant to, in Purdue’s words, “squelch the anti-OxyContin pushback.”
In 1999, when Purdue struck a similar deal with AdvancePCS, the third of the big P.B.M.s at the time, a Purdue sales executive, James Lang, celebrated: “We want to make OxyContin a billion-dollar drug in two years. This will help.”
“This is amazing,” Purdue’s president, Richard Sackler, replied.
Rebates formed the cornerstone of the relationships. In 2001, as OxyContin abuse made national headlines and regulators began trying to crack down, Purdue paid rebates of more than $31 million to Merck-Medco and $25 million to Express Scripts. By 2003, Purdue’s total rebates to P.B.M.s reached almost $200 million. (Merck-Medco later became part of Express Scripts, and AdvancePCS became part of CVS Caremark.)
Because the P.B.M.s often shared a portion of the rebates with the insurers and employers that hired them, these clients had a financial incentive not to impose restrictions. Purdue and the P.B.M.s sometimes reminded clients of this when they considered limiting access.
In a 2003 email, a Purdue executive, Bernadette Katsur, listed insurers that had abandoned planned restrictions on OxyContin — “proof of our success in working behind the scenes,” she wrote.
By teaming up with AdvancePCS, she wrote in another email, “we have eliminated many attempts” to restrict access to the painkiller. Another Purdue manager relayed a Merck-Medco executive’s account of the power of rebates: “The reason they have been able to keep various clients from placing” restrictions on OxyContin “has been the value of the rebates to them.”
An important test came in 2003. At a meeting with Purdue, an executive for the insurer UnitedHealthcare raised concerns about abuse of OxyContin, noting that some patients were being prescribed as many as 1,000 pills a month. The insurance company planned to limit prescriptions to 60 pills; doctors would need to call to get authorization for higher amounts.
For help, Purdue turned to Merck-Medco, the P.B.M. that UnitedHealthcare had hired to handle prescription drug benefits for its customers. The effort culminated in a meeting at UnitedHealth Group’s offices. A Merck-Medco official delivered a presentation on the “potential loss of rebates” to the insurer if it went forward with the limit, an executive for the P.B.M. reported to Purdue. “That information convinced the UHG team to change,” he wrote.
The insurer imposed a limit of 124 pills, more than double what it had previously planned.
Removing Barriers
Other drug companies adopted similar tactics — a playbook that would prove effective even as the opioid epidemic spread.
A manager at the drugmaker Mallinckrodt succinctly explained the access game to colleagues in 2012, after a group of large insurers imposed restrictions on one of the company’s painkillers. “We need to remove the barrier to growth, and that will require us to ‘pay to play,’” the manager wrote.
Express Scripts, the P.B.M. for the insurance plans, helped arrange a “rebate enhancement,” and the insurers loosened the restrictions.
Purdue and other leading drugmakers focused on avoiding two types of restrictions. The first was the requirement that doctors provide additional evidence to insurance companies or P.B.M.s that powerful painkillers were warranted.
In 2014, a large Blue Cross Blue Shield plan in New Jersey imposed such a requirement on Mallinckrodt’s drug Xartemis XR because of “safety, policy and chronic use concerns,” the drugmaker noted in an internal presentation. But after “assertive action” by Mallinckrodt and a P.B.M. called Prime Therapeutics, the Blue Cross Blue Shield plan “quickly reversed the decision.”
A second priority for opioid manufacturers was to ease limits on the number of pills that could be dispensed. As some insurers tried to slow the flood of pills fueling the epidemic, manufacturers pushed for limits that were often well above the Food and Drug Administration-approved dosing guidelines.
Purdue argued that P.B.M.s should allow patients to get at least 320 milligrams of OxyContin per day. That was four times the level that some states recommended and more than double the limit that P.B.M.s, under federal pressure, would later impose. A 2015 study found that patients who received even half that amount were far more likely to die than those prescribed lower doses.
The 320-milligram threshold was nonetheless enshrined in numerous rebate contracts between Purdue and the P.B.M.s. CVS Caremark negotiated an option that allowed clients to set a lower limit, but if they did, the rebate that they received from Purdue would be cut roughly in half.
David Whitrap, a CVS Caremark spokesman, characterized that as a “significant concession,” enabling clients to restrict the number of OxyContin pills while preserving some rebates from Purdue.
When opioid manufacturers struck a deal with a major P.B.M., they often urged their sales forces to capitalize.
After Mallinckrodt signed a contract with Express Scripts in 2014, for example, a sales manager relayed the good news to his team: “Make sure you let all your physicians know” that “they are free to write” prescriptions without insurance obstacles.
A ‘Public Health Imperative’
Long before the big P.B.M.s rolled out their opioid safety programs in 2017 and 2018, there was ample evidence that they had the power to help curb the opioid epidemic.
In the early 2000s, at the behest of Georgia’s Medicaid program, Express Scripts started requiring prior authorization for some prescriptions and placing limits on the number of pills that could be prescribed. A subsequent study by the P.B.M. found that the measures reduced the number of potentially inappropriate prescriptions.
“Any P.B.M. should be doing these things,” an Express Scripts researcher said when he presented the results at an industry conference in 2003.
Some private insurers, including Blue Cross Blue Shield plans in Tennessee and Massachusetts, took action even though it meant losing rebates.
“This was a patient safety and public health imperative,” said Andrew Dreyfus, the chief executive of Blue Cross Blue Shield of Massachusetts when it restricted opioid access in 2012. While the insurer saw its rebates decline significantly, it credited the changes with reducing the overprescribing of opioids. The Centers for Disease Control and Prevention also found that opioid prescriptions decreased after the insurer’s changes.
But despite the growing body of evidence, the largest P.B.M.s continued to use their leverage to wring larger rebates out of opioid manufacturers.
Optum Rx, for example, largely controlled access to patients with a Medicare drug plan run by the insurer UnitedHealthcare — a population that generated roughly $200 million in annual sales for Purdue. (UnitedHealth Group owns both the insurer and Optum Rx.) To keep OxyContin on the list of approved drugs, Purdue was already shelling out about 23 percent of every sale in the form of rebates, totaling nearly $50 million in 2012, documents show.
But the P.B.M. wanted much more: about 60 percent. Purdue executives resented the demand, but they also feared the downside. If the middleman cut off access to OxyContin, sales could plunge, and other P.B.M.s and insurers might follow suit, the drugmaker worried.
“This is a ‘no-win/tough’ decision,” a Purdue executive wrote to colleagues.
Purdue agreed to the deal.
Mallinckrodt, too, agreed to pay ever-growing sums to keep its drugs available without restrictions. For some Medicare plans, the drugmaker by 2015 was paying Optum Rx about 70 percent of every sale.
‘Stop With the Attitude’
The P.B.M.s’ longstanding arrangements with opioid manufacturers began to crumble in 2016. That March, the C.D.C. issued guidelines cautioning against excessive opioid prescriptions, especially those for high doses and large numbers of pills.
The middlemen also faced growing pressure from Medicare regulators to reduce opioid overuse, and more states were enacting their own restrictions.
By then, most opioid prescriptions were for generic versions of painkillers, on which drugmakers usually didn’t offer rebates. Even so, some P.B.M. executives fretted about potentially losing rebates on the remaining brand-name prescriptions.
In 2017, Express Scripts executives calculated how much money the company would lose by imposing restrictions and decided to charge clients for putting the safeguards into effect. The new fees should “make up for the rebate hit,” one executive said in an email. (Ms. Sessions, the Express Scripts spokeswoman, said the company charged for the program “to ensure that we have the staffing and resources necessary.”)
At Optum Rx, some executives pushed to delay new restrictions. They reminded colleagues that adding prior-authorization requirements and dose limits could violate the company’s contract with Purdue. Under that deal, the P.B.M. received rebates only if it allowed a daily dose of OxyContin that was far above the amount that the C.D.C. said was associated with increased risk of overdose.
But the idea of postponing the restrictions frustrated some Optum Rx executives, including David Calabrese, a senior vice president. In emails in 2017, he stressed the severity of the opioid epidemic and “the immediacy of the need for intervention.”
His concerns prompted a colleague to snap, “Stop with the attitude, and help us make sure we are compliant with our contracts.”
“My attitude,” Mr. Calabrese fired back, “is toward the gross overprescribing and overpromotion of these medications to our country’s citizens, the countless deaths and my commitment to doing whatever is within my power to put an end to it.”
The concerns about forfeiting rebates contributed to Optum Rx’s decision to delay at least some restrictions until 2018, emails show.
In the meantime, the P.B.M. renegotiated its deal with Purdue to continue receiving rebates despite the addition of restrictions. According to an internal Purdue memo, the drugmaker agreed to keep paying because it feared that it would be booted from the middleman’s drug lists altogether “if we do not keep them whole in terms of rebates.”
Purdue made similar concessions to other P.B.M.s, documents show.
Within a couple of years of the publication of the C.D.C. guidelines, the benefit managers had added authorization requirements for potent, long-acting drugs like OxyContin and redirected some patients to alternatives that posed less risk for addiction and abuse. The P.B.M.s also limited the number of pills and doses that could be dispensed.
The middlemen publicly touted the results of their programs, citing decreases in potentially inappropriate prescriptions.
Amid the positive publicity, an Optum Rx manager, Brian Sabin, floated the idea of going even further: What about removing OxyContin entirely from the company’s lists of covered drugs?
“Purdue has looked awful in the news since basically 2008,” Mr. Sabin wrote in a 2019 email to his colleague Venkat Vadlamudi. “They basically caused the opioid epidemic, and we’re essentially rewarding their bad behavior. From a purely P.R. perspective, I think it would look good on us.”
“Valid point,” Mr. Vadlamudi replied. “We as a company looked into this, but the amount of utilization on OxyContin and the rebates we collect prevented us from doing it.”
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