CVS accused of trying to push out its competition
Pharmacy giant CVS stands accused of overcharging Ohio taxpayers millions in an attempt to drive out retail competition — a charge that CVS flatly denies.
Bottom line: The company allegedly boosts its profits by overcharging insurers for medications while often reimbursing pharmacists less than the cost of the drug, critics say.
As a result, retail pharmacies in the Buckeye State have been dropping like flies, and state regulators are looking at ways to bring more transparency to a Medicaid benefits-management system that CVS dominates.
“Where I’m losing pharmacies right now is in high-Medicaid areas,” said Antonio Ciaccia of the Ohio Pharmacists Association. He noted that 165 Ohio pharmacies have shuttered in the past two years.
Medicaid, the federal-state health program for the poor and disabled, will spend about $3.2 billion on prescription drugs in Ohio this year. CVS Caremark, an arm of the company that manages pharmacy benefits, handles most of that money by billing insurers that contract with the state and then reimbursing pharmacies that fill patients’ prescriptions.
Ohio Medicaid Director Barbara Sears stressed, “This is not an Ohio Medicaid problem. This is impacting all 50 states. It’s a CVS Caremark issue, and it’s not just impacting independent pharmacies.” Sears said “larger chains” also have complained about reimbursement rates.
Ohio contracts with five managed-care companies to coordinate health-care services for 89 percent of Medicaid patients, paying them a set per-member, per-month fee. The managed-care companies hire pharmacy-benefit managers, dubbed PBMs, which decide which drugs are covered, negotiate rebates with drug companies, and set how much pharmacies get paid to dispense them to patients.
CVS Caremark is the pharmacy-benefit manager for four of Ohio Medicaid’s five managed-care companies.
Like Medicaid managed-care companies, PBMs are supposed to save taxpayers money.
Patrick Stephan, director of managed care for the state Medicaid program, said “managed care and pharmacy-benefit managers are saving Medicaid dollars.”
But the public doesn’t know how much of the more than $3 billion spent on pharmaceuticals goes to pharmacies and how much simply fattens PBMs’ bottom lines.
Ciaccia said he suspects that CVS Caremark is engaged in “spread pricing” — using one list with a low price to reimburse the pharmacist, and another list with a high price to bill the managed-care program, and pocketing the difference.
“The PBM industry has run amok,” said Max Peoples, who owns Uptown Pharmacy in Westerville and another drugstore in Marengo. “Reimbursement rates for Medicaid are more volatile and much lower. If the PBM is paying us less than what we can buy it for, it’s a problem.”