Understanding the requirements for resolving disputes with a PBM can be complicated, especially when those disputes involve arbitration. In this article, we describe what arbitration clauses are, when binding arbitration clauses can be enforced, and what to do if your pharmacy is faced with a dispute requiring arbitration.

What is arbitration?

Arbitration is one of many forms of dispute resolution procedures that serve as an alternative to litigation. In some cases, arbitration can be beneficial for pharmacy owners, as it often saves time and is less expensive than going to trial. However, litigation allows more opportunities for appeal, the potential to receive additional damages, and provides regulators with more oversight into PBMs’ practices.

As part of their pharmacy network agreements with pharmacies, many PBMs include binding arbitration clauses. If a PBM and an in-network pharmacy cannot resolve a dispute amongst themselves, binding arbitration clauses require the dispute to be submitted to an arbitrator, who will consider each party’s evidence before issuing a final decision. These clauses are often written with sweeping language intending to cover all disputes that arise from the pharmacy’s participation in the PBM’s network, allowing PBMs significant control over how disputes are resolved.

When is an arbitration clause enforceable?

In order for an arbitration clause to be enforceable, a court must find that the PBM and the pharmacy had a valid agreement to arbitrate issues like the dispute in question. A valid agreement requires “clear and unmistakable evidence” that the parties intended to submit a type of dispute to the arbitrator. This can include language in a contract that an arbitrator has “exclusive authority” to decide a type of dispute or references to the American Arbitration Association’s rules on dispute resolution procedures. Without clear and unmistakable evidence, a court cannot require a party to arbitrate a dispute, clearing the way for parties to resolve the dispute in litigation.

In many cases, a pharmacy will not be bound by an arbitration agreement if it did not sign the agreement. Many pharmacies enter network agreements through a pharmacy services administrative organization (PSAO), which enters into contracts on behalf of multiple pharmacies. If there is not “clear and unmistakable evidence” that a pharmacy represented by the PSAO intended to be bound by the arbitration clause, courts generally do not enforce these provisions and will not require the parties to go through arbitration.

How do I know if my dispute is subject to a binding arbitration clause?

Many pharmacy network agreements include a section detailing arbitration procedures, which list the kinds of disputes that are subject to binding arbitration. However, in many cases, arbitration clauses are not included in a pharmacy’s network agreement, but are included in the PBM’s Pharmacy Provider Manual. For this reason, it is vital for pharmacy owners to regularly review pharmacy provider manuals for updates to stay apprised of their rights in the event of a dispute.

What should I do if I my PBM is requiring me to arbitrate my dispute?

HLA regularly helps pharmacies navigate complex disputes with some of the country’s largest PBMs, including Optum, Express Scripts, and Caremark. If you are dealing with a dispute that may be subject to arbitration, let us help you navigate your options.