|FROM ||Ruben Safir
|SUBJECT ||Subject: [Hangout - NYLXS] Community Pharmacy is being destroyed by the PBMs
CVS paid itself far more than some major competitors, report says
MARTY SCHLADEN and CATHY CANDISKY | THE COLUMBUS DISPATCH
Jan. 20, 2019
CVS used its role as a pharmacy middleman for the Ohio Medicaid program
to pay some of its biggest retail competitors far less than it pays its
own stores, according to a section in a state report that CVS is
fighting in court to keep secret.
For example, CVS would have to pay Walmart and Sam’s Club almost half
again as much — 46 percent more — for generic drugs if CVS were to equal
the rates it was paying its own pharmacies, according to a copy of the
unredacted report for the Ohio Department of Medicaid that was obtained
by The Dispatch.
Also, CVS would have to pay pharmacies in Ohio-based Kroger stores rates
25 percent higher if it were to match what it was paying its own stores
during the year ending March 31, 2018, the report said.
"I don't know how this is legal,” said Ryan Bane, pharmacy director for
Riesbeck's Food Markets. The grocery chain operates pharmacies in five
of its 11 Ohio stores. The analysis showed that CVS’ pharmacy middleman
would have to pay Riesbeck's 29 percent higher rates for generic drugs
to equal what it was paying its own pharmacies.
“How does this happen?" Bane asked.
Mike DeAngelis, senior director of corporate communications for CVS
Health, said late Friday that the reimbursement from the middleman,
pharmacy benefit manager CVS Caremark, "is competitive across
independent pharmacies and chain pharmacies. A pharmacy’s performance
measurements affect the reimbursement it receives, such as its
medication adherence and generic dispensing rates. Reimbursement rates
also vary between the different types of retailers that operate pharmacies."
Under Ohio's Medicaid system last year, pharmacy benefit managers
determined both how much they charged the state for a prescription drug
and, in turn, how much they reimbursed each pharmacy for that drug.
Critics say the state report is strong evidence that CVS was, in
essence, using taxpayer money to give its own retail stores an unfair
advantage in the marketplace.
At the same time this issue is being scrutinized in Ohio, CVS is
attempting to convince a federal judge that its $70 billion proposed
merger with insurance giant Aetna doesn’t pose a threat to competition
in the pharmacy marketplace.
“This is startling information, the degree of difference” between what
CVS was paying some large competitors and what it paid itself, said
Thomas Greaney, former assistant chief of the U.S. Justice Department’s
Greaney, now a professor at the University of California Hastings
College of Law, helped plan the American Medical Association’s
opposition to the CVS-Aetna merger, which is now being reviewed by U.S.
District Court Judge Richard Leon in Washington, D.C.
“I think this will certainly get his attention, that there is conduct
consistent with the theory the Justice Department chose not to pursue,”
Greaney said, referring to the fact that the Justice Department didn’t
raise objections to the possibility that a merged company could use its
clout as both an insurer and pharmacy middleman to stifle competition
In the merger case, CVS is arguing that it won’t use its access to
Aetna’s patient information and market share to give its other
businesses an advantage — even though it has a financial incentive to do
so, said Neeraj Sood, director of research at the University of Southern
California’s Schaeffer Center for Health Policy and Economics. That fact
that CVS is reimbursing some retail competitors at a far lower rate than
it’s reimbursing its own “shows they’re not doing that.” He added, “I’m
sure the judge will notice this.”
The Ohio Medicaid report shows big differences in reimbursement rates
for generic drugs, which made up 86 percent of drug transactions,
according to a subsequent analysis done by former state auditor and
current Attorney General Dave Yost. Reimbursements for brand-name drugs
were fairly consistent between CVS and its retail competitors.
The Medicaid report found no evidence of anti-competitive reimbursement
practices by CVS, but it looked only at the pharmacy benefit manager’s
reimbursements to independent pharmacies in asking that question. CVS
has long maintained it pays local pharmacies higher rates than it does
CVS stores, and the report confirms that.
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DeAngelis said, "The Ohio Department of Medicaid released information
that CVS Caremark reimbursed independent pharmacies at a higher rate
than CVS Pharmacy in a press release and an executive summary three
months before the redacted report was released, as one of its stated
objectives was to determine whether or not independent pharmacies were
being put at a competitive disadvantage."
CVS allowed the two lines of the report that confirmed its claims about
independent pharmacies to be made public. But it wants to keep secret
the rest of the information on two pages that show what CVS Caremark
paid to other pharmacy groups operating in Ohio; those figures are
blacked out on the version of the report released to the public.
DeAngelis didn't respond to several questions, such as why CVS wants to
keep so much of the report secret from the public. When the censored
version of the report was released in September, he said, "While some
questioned the need for redactions, the disclosure of our proprietary
rates, formulas and negotiation strategy to lower the drug prices
charged by pharmaceutical manufacturers would have significantly
impacted our ability to negotiate the lowest rates and fees for our
clients in a highly competitive market, which would ultimately cost the
state and the taxpayers more."
Though the state Medicaid report shows that some of CVS’ biggest
competitors faced the biggest disadvantages as a result of its
reimbursement practices, smaller pharmacies also faced challenges.
Ritzman Pharmacy, for example, announced this month that it is selling
its 20 northeastern Ohio stores to CVS, which says it plans to close 17
of them and reopen at least two as CVS stores.
CVS would have to pay Ritzman rates that are 2 percent higher for
generics if it were to match what it was paying its own pharmacies, the
report says. That margin helped CVS buy a competitor and close most of
its stores, said Antonio Ciaccia, a spokesman for the Ohio Pharmacists
Greaney said economists have names for such behavior: “vertical
foreclosure” and “raising rivals’ costs.”
“This is the most straightforward way to do it,” he said.
Low reimbursements on Medicaid prescriptions also were among the reasons
Riesbeck's Food Markets closed its store in the Eastern Ohio village of
Wintersville last fall.
"We know we're lucky to break even with Medicaid" prescriptions, Bane
said, adding that his pharmacies often lose money filling Medicaid
Indeed, Medicaid’s own report casts doubt on the notion that CVS
reimbursements were sustainable for pharmacies that were its retail
“Findings do not indicate that the pharmacies were reimbursed adequately
to be profitable,” it said.
And though CVS pharmacies were among those the report referred to, the
same analysis found that CVS’ middleman arm charged taxpayers $197
million more for drugs than it paid pharmacies.
Walmart and Kroger officials declined to comment for this story. Walmart
raised concerns about CVS’ practices by announcing last week that it was
suspending most of its business with the pharmacy benefit manager, CVS
Caremark. Walmart said it was “standing up to” CVS and criticized its
“unregulated power to direct members on where to fill their scripts,
disrupting patients’ health care.”
CVS and Walmart announced Friday that they had come to an agreement, but
an industry analyst told Business Insider on Thursday that CVS has a
long-term strategy to drive customers out of Walmart pharmacies and into
Sen. Bill Coley, R-Cincinnati, long a critic of CVS, noted that he
hasn't seen the unredacted report, but he said that if numbers quoted to
him by The Dispatch are accurate, it is "shocking."
"We want to be pro-competition and pro-free enterprise," he said.
"They're acting as a monopoly, using the government to give them an
unfair advantage over Kroger and Walmart."
The member of the Joint Medicaid Oversight Committee added, "We have to
ask whether we want this company participating in the Ohio (Medicaid)
Though CVS reimbursed two of its large retail competitors much less than
it did itself, the rates it paid another, Walgreens, were 17 percent
higher than it paid itself. DeAngelis was asked to explain but did not
The Ohio Department of Medicaid commissioned the analysis last year
after The Dispatch did an analysis of its own, using reimbursement data
obtained from more than 40 community pharmacists.
The state then obtained all data from the $2.5 billion spent on drugs by
Medicaid managed-care plans, and its analysis determined that CVS
Caremark — which represents four of the five plans — and the other,
OptumRx, were billing taxpayers 8.8 percent more for drugs than they
were paying the pharmacists who dispensed them. That amounted to a $224
million differential. The state report said that the PBMs were charging
Ohio taxpayers three to six times the standard industry rate.
The Medicaid department initially released only a summary of the report,
and then it released a report with numerous redactions that were made at
the demand of the pharmacy benefit managers, CVS and OptumRx.
The pharmacy benefit managers and the state have been locked for months
in a court battle over release of the full report. The sides haggled
until early December just over rules governing how to handle the
Franklin County Common Pleas Court Judge Jenifer French delayed a
hearing on the matter until April 30. That would push a decision and
possible release of the redacted information past the time when Ohio
will get a two-year budget from Gov. Mike DeWine and possibly past the
time when the federal court decides whether to approve the CVS-Aetna merger.
State Medicaid officials hinted last year that there could be problems
with reimbursements to the larger chain pharmacies, but never disclosed
the scope of the problem.
Barbara Sears, then the director of the Ohio Department of Medicaid,
told colleagues last fall at a conference of the National Association of
Medicaid Directors in Washington, D.C., “there were some allegations
that there may be some anti-competitive behavior going on both with
reimbursement differentiation between independent pharmacies and the
But even as early as March 2018, Sears noted, “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.
Sears announced in August that Medicaid would switch to a transparent,
pass-through-pricing model that pays pharmacy benefit managers a set fee
per transaction and requires them to pay pharmacies the same amount they
bill the state.
“We are going to try and follow every penny,” said Sears, who resigned
as the state Medicaid director at the end of last year.
Ohio’s community pharmacists long have complained that in the Medicaid
program, CVS has reimbursed them below their costs and then offered to
buy their stores. They’ve been skeptical of CVS’ statements that a
strict “firewall” keeps it from sharing information gleaned by its
middleman business with its retail operation.
Sood, of USC, said it doesn’t have to share the information to derive an
“Despite whether there’s a firewall, CVS Caremark knows CVS retail is
part of the same business,” Sood said. “It’s not like they’re blind to
which pharmacy they’re negotiating with.”
As Ciaccia of the pharmacists' association put it, “Caremark knows what
they contracted to pay Kroger. Caremark knows what they contracted to
pay Walmart. They have to know that when they slide an offer across the
table to CVS, it’s a lot more.”
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The profession of pharmacy is being strangled to death by the Pharmacy
Benefit Management Companies, especially Express Scripts and CVS
Carmark. Pharmacist do valuable jobs, and earn their pay by working
with the entire scope of the healthcare system. My entire life has been
committed to helping patients across New York City, amongst nearly all
ethnic groups and economic classes and a through a wide swath of
neighborhoods in the five boroughs, from the Upper East Side of
Manhattan to East New York. I’ve worked for Veterans, in hospitals, in
chain drug stores and in independent pharmacies. Independent pharmacy
has been the linchpin to my career. There have been years, even
decades, when chain drug stores and hospitals had refused to hire
Orthodox Jews. Without independent pharmacy, my career would have ended
in the 1990’s. It was only because of the pharmacist shortage that
civilian positions started to open among chains and hospitals, and only
as floating pharmacists, or working through agencies.
In my years of experience in independent pharmacy, I’ve come to work
with and help communities on a deeply personal level. I’ve had to work
with Holocaust survivors that had been inadvertently become addicted to
narcotics while looking after their mental health and families. I’ve
had to work with AIDs patients as they were dying and to mediate with
their families and the broader medical establishment as they were used
as human guinea pigs for experimental treatment that most often didn’t
work. I have had to call hospital clinics to intercede for impoverished
patients who left outpatient facilities at major city hospitals, with
Maalox prescriptions, as they were doubled over in pain at my counter,
obviously in life threatening conditions, but ignored by the clinics due
to their minority status and their history of drug abuse. Twice such
interactions had saved patients from bleeding ulcers which would have
killed them, as evident by their being then admitted for emergency
services and surgery after I reached attending doctors directly.
I’ve also had to deal with my fair share of attempts at fraud. I’ve had
to turn down Immigrant patients with books of prescriptions, trying to
get money for prescriptions multiple times, and try to figure out when
they really needed treatments or were just conning the system. Drug
abusers, pimps, scam artists, workman comp scammers, etc have all had to
be vetted at my door. And while not perfect, I have dealt with these
cases with honesty and to the best of my ability, and in return, I have
been appreciated by families of all backgrounds, in conditions that are
unique to New York City.
In today’s hostile environment, every day I go to work knowing that law
enforcement looks at me as a criminal more than an asset. And every day
I come home without being investigated, I feel like I’ve put my head in
the lions mouth and escaped, yet one more time.
More than once I have left employment over ethical issues from
hospitals, chains and independent ownership. I’ve seen Duane Read put
thousands of dollars of inventory in conditions that render the drugs at
best impotent in a Midtown location. I’ve dealt with hospitals who let
premature babies die because of failure to get needed IV orders to
floors on over night shifts. I’ve seen numerous pharmacies being run
without pharmacist, especially in Elmhurt Queens because of a basic
failure of the Board of Pharmacy to enforce the law. I reported
narcotics loses to one hospital administration and was then fired. I’ve
had to deal with corruption in OMIG which nearly cost me my career for
no cause other than doing my job and keeping the public trust.
What I do, is deep in the trenches of the healthcare system and it
provide an invaluable service to the community. But my career has been
destroyed by the fraud and greed of the Pharmacy Benefits Management
companies who has promised New Yorkers to control costs and to improve
access, but instead act to prevent access, and have raised costs.
Specifically they have targeted the city’s outer boroughs, Brooklyn, the
Bronx and even Queens for discriminatory practices designed to crush my
profession for their own profits, and the biggest targets of all are in
To be continued...
So many immigrant groups have swept through our town
that Brooklyn, like Atlantis, reaches mythological
proportions in the mind of the world - RI Safir 1998
DRM is THEFT - We are the STAKEHOLDERS - RI Safir 2002
http://www.nylxs.com - Leadership Development in Free Software
Being so tracked is for FARM ANIMALS and extermination camps,
but incompatible with living as a free human being. -RI Safir 2013
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