Tit for Tat: CVS Caremark Kicks Walgreens Out of Its Network

Some of our clients have asked about the rationale for the Walgreens/CVS-Caremark issue. Clearly money is the primary rationale. However, the National Community Pharmacist Association (NCPA) is providing some other rationale from their viewpoint. We thought that you would find this of interest.

NCPA eNews Weekly | June 15, 2010

Two days after Walgreens announced that it would not participate in any future CVS Caremark network plans, CVS Caremark responded by terminating Walgreens' participation in all its network effective July 9. The giant chain pharmacy/PBM/ mail order conglomerate said it would drop Walgreens from its Medicare Part D network effective Jan. 1, 2011.

When Walgreens announced its decision June 7, it cited many of the same problems experienced by independent pharmacies and prompted NCPA 18 months ago to launch a campaign for a Federal Trade Commission investigation of CVS Caremark's business and patient privacy protection practices. Last November, CVS Caremark disclosed that it was under FTC investigation. In addition, 24 states are probing the company created by the merger of the pharmacy chain with a PBM/mail order firm. NCPA members have had a number of meetings with FTC officials about their experiences since the 2007 merger.

Those experiences largely mirror those cited by Walgreens:

CVS Caremark limits patient choice by requiring patients in Maintenance Choice and other plans to use CVS retail pharmacies or Caremark mail order facilities.

CVS Caremark provides little or no information when a CVS Caremark prescription drug plan is transferred to a different and differently-priced CVS Caremark pharmacy network, or when CVS Caremark acquires a new prescription drug plan as a client."

CVS Caremark reimbursement rates are unpredictable and payments for certain drugs often don't reflect the market."

"If a large, publicly traded chain with the clout of Walgreens finds the business practices of CVS Caremark untenable, then it's easy to understand how much greater the problems have been for independent community pharmacists and their patients," commented Joseph H. Harmison, PD, NCPA president. "The concerns expressed by Walgreens echo and further validate the concerns expressed by independent community pharmacists and their patients."

"Unfortunately, for most independent pharmacies, simply telling CVS Caremark 'no' isn't a viable business option," Harmison continued. "The evidence is piling up and hopefully corrective action will be taken that either erects substantial walls between CVS and Caremark or rescinds the merger so that the market can operate equitably without one company abusing the system for its enrichment at the expense of patients and fair competition among pharmacies."

Craig S. Stern, PharmD, MBA
President
Pro Pharma Pharmaceutical Consultants, Inc.

Is Flat Fee A New Trend?

Payers understand that one of the major advantages of a PBM (Pharmacy Benefit Manager) is their pharmacy network. PBMs sign up pharmacies, approve and monitor pharmacy claims in real time, set up formularies, and send the pharmacies checks for prescriptions filled.

• Most pharmacies expect to get paid for dispensing prescriptions based on a formula that is outlined in their network contract.
• Most payers expect to pay their invoice for dispensed prescriptions based on the formula that they agreed upon in their contract.
  
  It is understandable that pharmacies may be paid a different price in one network. One would expect urban dispensers to compete for the network and drive the dispensing fee down. Conversely, a rural pharmacy (possibly the only drugstore in town) would probably get a higher price for filling a small community’s prescriptions.
  
  Networks also contain other dispensers such as mail order pharmacies, specialty products pharmacies, and preferential pharmacies. Each group would probably have a different contract and a different payment formula.
  
  What about government pharmacies that fill prescriptions in a non-government network? The VA (Veterans Administration) is such a network.
  
  Government pharmacies buy drugs at special government prices. Many prices are 50-75% below the community pharmacy cost.
  (The government doesn’t need to buy drugs from Canada because it already gets a very special low price.)
  The government, because of their buying advantage, is not supposed to compete with community pharmacy. In many cases, the government gives away prescriptions to the disadvantaged and has many programs to assist states in covering the medical needs of those that can not afford care.
  
  Based on the government’s goals and purpose in the health care system it is understandable that they would get a special low price on drugs. It is also understandable that the government can dispense drugs for a much lower price than can retail pharmacy. But what about the reverse? What if the government charges a payer more than retail pharmacy – in a flat fee system?
  
  One network (XYZ) that is of interest is with one PBM and the VA on the east coast. Instead of charging a low price for drugs, they are paid $51 for each prescription they fill no matter what the cost. How could this happen? More importantly, why did this happen? Community pharmacy is paid on a cost plus a dispensing fee formula and the VA on the east coast is paid on a flat fee formula?
  
  We called several VA pharmacies and tried to find out if they knew that they were being paid much more than retail pharmacies on each prescription and no one knew what we was talking about. When the PBM was asked we were told that this is what the VA demanded.
  
  Should community pharmacy ask for a flat fee too? Is this a new trend in contracting? And even more complicated, should the government give payers the advantage of their lower cost of drugs?
  
  Please let us know if you have seen any of these issues. We are interested in your comments and opinions.
  
  
• Developed by Barry Pascal, PharmD, Pro Pharma Pharmacist