For pharmacies, payments received from contracts for insureds are the lifeblood of their business. Unfortunately the contracts with Pharmacy Benefit Managers (PBMs) are generally what are described in the law as “contracts of adhesion,” meaning the agreements are generally take it or leave it propositions that cannot be negotiated. So when signing a contract, the fine print is generally ignored because disputing the language is of little use and the contract is too valuable to risk losing.

However, pharmacy owners should be aware of some of the implications of those agreements. One item, included in more and more agreements by contracting entities, including PBMs is arbitration clauses. The New York Times did a series on the rise of arbitration clauses on consumers. The same issues affecting consumers also affect pharmacies, particularly when a dispute involving the application in the contract comes up. Arbitration is an alternative to civil lawsuits, and in many ways, arbitration can be a good thing, it allows parties in a dispute to resolve their matters without being stuck for years in civil court waiting to be heard. Essentially an arbitration is a non-jury proceeding with an independent lawyer acting as a judge. The arbitrator holds a trial, often with relaxed rules of evidence, and issues a decision after the trial. Under some agreements, a party unhappy with the results can still go to court afterward; but sometimes the arbitration results can be used by the court and therefore often leads to a similar result.

Some of the downsides of Arbitration includes that the parties are required to split the cost of the judge, which can be expensive. Also, those agreements often prevent class actions because they are individualized to each party so a group of pharmacies cannot pool their resources. Also, the clauses can contain location or venue provisions that require a pharmacy to fight in an arbitration proceeding thousands of miles away.

Often a pharmacy owner first learns of the arbitration proceeding when a PBM or its lawyer sends a letter with an arbitration complaint attached, stating an allegation that the pharmacy has violated a provision of the contract and if not settled to the PBM’s satisfaction, will be filed forthwith. To be prepared for such an occurrence, or the other implications of their contacts, pharmacy owners should discuss their agreements with their lawyers and learn in advance what those agreements mean.

Click here to read an additional article Mr. Cassidy penned on Compounding Pharmacies for the Daily Business Review

Bernard M. Cassidy is an attorney specializing in health law, health law regulatory and white-collar criminal defense. Mr. Cassidy began his career as a Law Clerk to the Honorable Joel Pasano, a former Magistrate Judge now District Court Judge. Mr. Cassidy is a former Assistant Prosecutor in New Jersey and a former Assistant Attorney General and Assistant Statewide Prosecutor in the State of Florida. As an Assistant Attorney General, Mr. Cassidy defended the State of Florida in lawsuits and brought cases to protect consumers in both civil and criminal courts. Of note was Mr. Cassidy's experience in prosecuting violations in the health law field, which experience has proven invaluable in his representation of Doctors, pharmacists, pharmacies, clinics and associations of particular healthcare providers. Before striking out to form his own firm, Mr. Cassidy practiced in the healthcare and white-collar criminal defense sections of Broad and Cassel in Fort Lauderdale, Florida.