Alabama Litigation Review : North Alabama Personal Injury Lawyer & Attorney : Jeff Blackwell : Hornsby, Watson, Hornsby, Blackwell & McKown Law Firm : Commercial Litigation, Workers' Compensation : Huntsville, Decatur, Athens

Last night, a local news channel featured one of my clients and his on-going battle against a California company that wants to restrict pharmacy benefits in Alabama.  Below is the video clip featured on the news:

So, what is the story here?  Long ago, the Alabama Legislature created an employee benefit plan providing medical benefits to public school teachers.  The plan is commonly referred to as PEEHIP (Public Education Employees' Health Insurance Plan). Its benefits include pharmacy benefits.  The plan is similar to the plans most of us enjoy through our private employers.  However, because there are school teachers throughout our state, the impact of changes to their health plan affects every area of Alabama both urban and rural. 

So, what is the problem?  Alabama law provides certain protections that allow us to go to the pharmacy of our choice for prescription medications.  Our laws also require that pharmacists be paid usual and customary rates.  These are important protections for both the pharmacist and the person having their prescription filled.  For individuals, it means we can choose a pharmacist we know is competent instead of having someone else choose for us.  It also means that we can go to a nearby pharmacy rather than being forced to drive for miles and miles just to get necessary prescriptions.  In rural areas, this is very important since there may not be many nearby options. Even in highly populated areas, the recent tornado disaster provides a valuable lesson concerning the impact of limited access to necessary commodities such as prescription medications.  During that disaster, the only pharmacies open in some areas of our State were those independently and locally owned.  The protections in our laws also insure that pharmacies can compete with each other fairly.  This is the way it is supposed to work.  It is in the best interest of the public.

In 2010, a company known as MedImpact Healthcare Systems hired a new executive whose previous employer was Walmart.  In fact, at Walmart, he had responsibilities over the provision of pharmacy benefits.  Unfortunately, for the school teachers in our State, in 2010 MedImpact also became the administrator of their pharmacy benefits.  As the following news articles relate in stories from Jackson County and Cullman County, this is when MedImpact began providing pharmacy contracts that kept local, independent pharmacies from providing medications under PEEHIP.  Instead, huge chain stores benefited.  MedImpact justifies its current actions in the name of cost savings.  Really?  Does it save costs for teachers in rural areas who cannot easily get their medications?  Does it save costs in the long run when there is no competition left among pharmacies and the few large chain stores have control over the supply, the market, and the price?  What will happen to prices then?  Does it save costs to push local pharmacies with much lower error rates from the market?  Prescription errors result in huge costs. 

With these administrative changes to one of the largest health plans in our State, how are individual pharmacies being treated?  How do payment terms differ between pharmacies?  Since starting its plan to limit pharmacy access in Alabama, MedImpact has never provided any data concerning the claims it has paid various pharmacies.  These are all important, but unanswered, questions.

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The case is all too common.  A manufacturer hires an independent sales representative.  The sales representative works hard to bring in an important customer.  Yet, once the manufacturer thinks the customer relationship is secure, the manufacturer then begins to cut out the sales representative in an effort to increase its profits.

The manufacturer never paid an employee a salary to find, cultivate, or secure the valuable customer.  The manufacturer never incurred costs to locate the customer.  Instead, the manufacturer had an agreement with a sales representative that paid commissions based on the sales generated by the relationship.  What the manufacturer often wants is the profit of a customer relationship with no expense, including the expense of paying the agreed-upon sales commissions.  This scenario - the clear abuse of the relationship between a manufacturer and its sales representative - has occurred so often that the Alabama Legislature enacted a special statute, the Alabama Sales Representative's Commission Contracts Act, to address it.  Our courts have addressed the Act and its protections in cases like Lindy Manufacturing Company v. Twentieth Century Marketing, Inc., 706 So.2d 1169 (Ala. 1997).

Our legislature considered it so important to remedy this abuse, it crafted a statute that allows treble damages plus attorneys' fees.  The statute and its protections are vitally important to Alabama's economy.  The local economy, in the Huntsville area, is largely based on the development, production, and sales, of advanced technological products.  Sales representatives often cultivate and secure the long-term customer relationships that fuel business growth.

A bad economy only increases the cost cutting measures by manufacturers.  However, when cost cutting measures involve breaching a prior agreement or denying someone their proper compensation, it is wrong.  When this happens, the sales representatives often simply give up.  In Alabama, they don't have to walk away from their hard work.  This is one scenario where Alabama law genuinely protects the victim.

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