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|SUBJECT ||Subject: [Hangout - NYLXS] The Pharmacy Scam continues
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From: Ruben Safir
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Subject: [Hangout - NYLXS] The Pharmacy Scam continues
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Why CVS Loves ObamaCare
Medicaid expansion helps big business reduce competition. Ohio is a case
Why CVS Loves ObamaCare
Photo: shannon stapleton/Reuters
By The Editorial Board
May 29, 2018 6:38 p.m. ET
Big business feasts on big government, and ObamaCare has been a bonanza
for companies that have figured out how to exploit it. Witness how CVS
Health is dining out on Ohio=E2=80=99s Medicaid expansion.
In addition to retail pharmacies, CVS operates a pharmaceutical benefit
manager (PBM) that acts as a middleman between insurers, pharmacies and
drug manufacturers. PBMs decide which drugs are listed on a formulary,
how much pharmacies are reimbursed and how much insurers pay.
Ohio contracts with five managed-care organizations (MCOs) to administer
Medicaid benefits, four of which outsource their drug benefits
management to CVS Caremark, the CVS PBM. The state uses drug claims data
to set its annual drug budget. So if claims increase, the state will
allocate more Medicaid funds for drugs the following year.
Foreign Edition Podcast
Yet CVS appears to be billing the state for far more than what it is
paying pharmacies, driving up taxpayer costs. CVS=E2=80=99s actual drug pay=
aren=E2=80=99t transparent to the state or MCOs.
CVS is also attempting to drive independent pharmacists out of business
and expand its retail market share. We spoke with eight current or
former independent pharmacists in Ohio who complained that CVS has
slashed payment rates below the pharmacists=E2=80=99 wholesale drug costs. =
say CVS is pocketing the increased =E2=80=9Cspread pricing=E2=80=9D=E2=80=
=94that is, the
difference between what the PBM pays pharmacies and charges the state.
The precondition for this Medicaid machination is ObamaCare. In the last
decade Ohio=E2=80=99s Medicaid enrollment has swelled by more than half to =
of the state population, driven in large part by ObamaCare=E2=80=99s expans=
to people earning up to 133% of the poverty line. Medicaid is now the
biggest insurer in many rural areas where independent pharmacies
Independent pharmacists say they first noticed a decline in Medicaid
payment rates three years ago. CVS slashed them further last fall. For
35 years Larry Hildebrand ran a pharmacy in Marengo, a town with a few
hundred people. When he started to lose money from declining Medicaid
payments, he sold his pharmacy to CVS, which bought his drug inventory
and prescription files. After he closed, his customers had to travel 25
more miles to get prescription filled at CVS.
Dominic Bartone has been a pharmacist for 41 years and operated three
retail pharmacies in Dayton and two in Lebanon. After CVS cut payment
rates last fall, his Lebanon pharmacies were losing money on between 40
to 50 prescriptions a day. When Mr. Bartone complained to the MCOs about
below-cost reimbursements, he didn=E2=80=99t get a response. Eventually he =
to stop delivering prescriptions to patients in institutions. In
February he and his business partners sold the stores to CVS.
Most pharmacists don=E2=80=99t want to be publicly identified because their=
contract bars them from disclosing payment rates. But one said he was
getting paid 18 cents per capsule of the generic antidepressant
duloxetine while his wholesale cost is about 23 cents. According to
Centers for Medicare and Medicaid Services data, PBMs in Ohio last fall
were charging Medicaid $1.53 per duloxetine pill. The spread pricing for
a 60 mg dosage of duloxetine during the first nine months of 2017
totaled $6.3 million.
Several pharmacists said that they were losing between $60 and $100 last
fall on each prescription of buprenorphine, a generic opioid addiction
Ohio state Senator Dave Burke, who runs an independent pharmacy and
serves on the state Joint Medicaid Oversight Committee, says two-thirds
of the Medicaid drug claims he processes are below his drug acquisition
cost. He=E2=80=99s fortunate that Medicaid patients make up less than a qua=
of his customers.
CVS payment rates, he says, are =E2=80=9Ctake it or leave it.=E2=80=9D Inde=
pharmacists have no negotiating leverage. If pharmacists refuse to
accept Medicaid prescriptions, they risk losing CVS contracts for
Medicare Part D and commercial plans that typically pay more.
Some pharmacists said that after the Medicaid payment reductions they
received solicitations from CVS Pharmacy Regional Director of
Acquisitions Shane Stockton saying: =E2=80=9CI=E2=80=99m a pharmacist mysel=
f. I know
what independents are experiencing right now; declining reimbursements;
increasing costs, a more complex regulatory environments. Mounting
challenges like these make selling your store to CVS Pharmacy an
attractive and practical option.=E2=80=9D
In the last three years, Ohio has lost 164 independent pharmacies while
CVS has added 68. A CVS Caremark spokesperson told us that the company
maintains a firewall between its PBM and retail pharmacies as required
by a 2007 Federal Trade Commission merger agreement. CVS also says it
pays independent pharmacies on an aggregate basis more than chains,
though the spokesperson didn=E2=80=99t define aggregate.
When Arkansas Independent Pharmacies obtained insurance explanation of
benefits data from Medicaid patients, they found that CVS Caremark
billed Medicaid plans more than twice as much on average as what their
pharmacies got paid. Data from fully-insured commercial health plans
showed that CVS paid itself over $60 on average more per prescription
than independent pharmacists.
ObamaCare requires MCOs to spend at least 85% of all taxpayer dollars on
patient medical claims and care improvements. The rest can be split
among overhead, marketing and profits. Contracting with PBMs allows MCOs
to off-load administrative costs and thus take more profit. Rising drug
claims also let them pocket more money. Mr. Burke, the Ohio legislator,
says this dynamic encourages a =E2=80=9Cdon=E2=80=99t ask, don=E2=80=99t te=
between PBMs and MCOs.
States ostensibly have an incentive to curb their Medicaid spending and
scrutinize PBM payments. Yet many may be turning a blind eye because
they can pass on the bills to the federal government, which picks up 63%
of the costs for Ohio=E2=80=99s pre-ObamaCare population and 94% for the
But as neighborhood pharmacies close, health-care access for low-income
patients diminishes. That at the very least should concern politicians.
Appeared in the May 30, 2018, print edition.
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